If you’re behind on your house payments in Arizona, stay vigilant. In most cases, the only notice you’ll get about an upcoming foreclosure sale is a notice sent through the mail and posted on your property. Fortunately, under Arizona law, you can bring the loan current until the day before the sale. In addition, if the sale goes through, and the auction fails to bring enough to pay off the mortgage, most foreclosed homeowners in Arizona won’t be responsible for the outstanding mortgage balance.
(Find out more about foreclosure by reading Foreclosure and Your Home: Understanding the Process, Your Rights, and Your Options.)
When the Foreclosure Can Start: 120-Day Waiting Period
If you’ve fallen behind on monthly mortgage payments, the lender (the owner of your loan) or mortgage servicer (the company that collects your payment) must go through the foreclosure process before it can take your home, sell it at auction, and use the proceeds to pay off your home loan. However, in most cases, the lender can’t start the foreclosure immediately after you miss a payment. A federal law went into effect in 2014 that gives homeowners time to get back on track after falling behind in mortgage payments. Under this law, the lender generally cannot start a state foreclosure action until a mortgage payment is more than 120 days past due.
(Read more about the time your lender must wait before proceeding with a state foreclosure action in Delaying Foreclosure: The Dodd-Frank Act 120-Day Rule.)
How the Foreclosure Process Works
Two types of foreclosure exist in Arizona: judicial and nonjudicial. Most of the time, the foreclosing lender will choose to use the streamlined, less expensive nonjudicial process. Here’s a short explanation of both types.
Judicial foreclosure procedures. Judicial foreclosure starts when the lender files a lawsuit against you (the homeowner) with the court. If you don’t respond—for instance, by filing an answer or another response—the lender will win and receive a “default judgment.” If you fight the foreclosure, the case will move into the “discovery” phase (both sides exchange discovery). The court will determine who wins the case after hearing a summary judgment motion (a motion asking the judge to find that the other side lacks a triable issue of fact) or trial. If the lender wins, the court will enter a judgment against you giving the lender the right to sell your home at a foreclosure sale.
Nonjudicial foreclosure procedures. A nonjudicial foreclosure doesn’t require the filing of a lawsuit by the bank. Instead, the bank sells the home to a new owner after following the steps found in state law.
(Read more about the two types of foreclosures in What Are the Differences Between Judicial and Nonjudicial Foreclosures?)
Nonjudicial Foreclosure Procedures in Arizona
In Arizona, most homeowners sign a document called a “deed of trust” when taking out a home loan. The trust deed appoints a "trustee" to handle the foreclosure process (at the lender's request) if the borrower doesn’t make the monthly payments.
The trustee starts the Arizona nonjudicial foreclosure process by recording a notice of sale in the county records. The notice of sale must state the date, time, and place of the sale. The sale date must be set at least 91 days later (91 days after the trustee records the notice of sale).
Within five days of recording the notice of sale, the trustee must send a copy of the notice to the borrower by registered or certified mail. In addition, the trustee must do the following with the notice:
- Post it on the property and at a court building at least 20 days before the sale.
- Publish it in the newspaper once a week for four consecutive weeks.
Stopping the Foreclosure By Bringing the Loan Current
Under Arizona law, the homeowner can prevent the nonjudicial foreclosure sale by “reinstating” the loan before 5:00 p.m. MST on the day before the sale (other than on Saturday or a legal holiday). To reinstate the loan, the owner must bring all missed payments, fees, and costs current in one lump sum payment.
No Deficiency Judgments for Most Arizona Homeowners
If a home sells for less than the amount of the outstanding loan balance at the foreclosure sale, the difference between the sale price and outstanding debt is known as a deficiency balance. Some states allow the lender to sue the foreclosed owner in a separate lawsuit to obtain a deficiency judgment for the remaining amount.
Most homeowners in Arizona won’t face a deficiency judgment after the foreclosure. Under Arizona law, the lender cannot get a deficiency judgment after a nonjudicial foreclosure if the property is 2.5 acres or less and is a single one-family or a single two-family dwelling. Similar protection against a deficiency judgment exists if the foreclosure is judicial.
No Right to Redeem After a Nonjudicial Foreclosure
In some states, the foreclosed homeowner can redeem (repurchase) the property within a particular period after the foreclosure sale. Arizona law, however, does not permit the former owner to redeem the home after a nonjudicial foreclosure.
Finding Arizona Foreclosure Law
You can look up Arizona’s nonjudicial foreclosure laws in Arizona Revised Statutes (sections 33-801 to 33-821).
Questions for Your Attorney
- Do I have legal grounds to fight the foreclosure?
- Can I avoid a foreclosure altogether?
- Will I have time to move out if the house sells at a foreclosure auction?