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  1. #1
    Join Date
    Jun 2011
    Posts
    2

    Default Second Mortgage Liability After Foreclosure

    My question involves a foreclosure in the State of: AZ

    I've seen posts here regarding "recourse" and "non-recourse" mortgages and would like some input on my specific situation.

    In 2005 we took out a purchase money mortgage for our house (80%, we put down 20%).
    In 2006 we took out a loan (Citifinancial) for a car.

    In 2010 the first was foreclosed on and the house was auctioned. The Lender for the first provided paperwork that they had released all interest in our mortgage and would not pursue it.

    Here's where I'm a bit confused. The paperwork for the 2nd doesn't say specifically what type of loan it is (HELOC, or ???), but includes the provision that we were giving the Lender a "security interest in Real Property", and includes a Deed of Trust.

    It also includes a "Request for Notice of Default and Foreclosure Under Superior Mortgages or Deeds of Trust".

    I am now receiving requests for payment from both the 2nd Lender (Citifinancial) and the third-party collection agency they use.

    So my question is -
    Given that the 2nd was secured by the house (and inc a Deed of Trust), and that the property was foreclosed on, am I still liable for the balance?

    Thanks in advance

  2. #2
    Join Date
    Sep 2010
    Posts
    8,649

    Default Re: Second Mortgage Liability After Foreclosure in Az

    Only purchase money is without recourse. Your second mortgage taken out a year later is not barred from recourse.

  3. #3
    Join Date
    Jun 2011
    Posts
    2

    Default Re: Second Mortgage Liability After Foreclosure

    Thanks Ron.
    So even though the 2nd was backed by the property with a DoT, because it was for non-purchase money, there is recourse, correct?

    I just want to be clear on my understanding. There's another thread here with a similar situation (although a small % of the 2nd is apparently purchase money) with the following comments (hence my confusion) -

    http://www.expertlaw.com/forums/show...27&pagenumber=

    Mr. Knowitall
    As I read ARS 330814(g) it doesn't distinguish between purchase money loans and other loans. But it's really something you should run past an Arizona real estate lawyer who is familiar with how your state's courts interpret that statute, and who can confirm that it applies to your property.

    mightymse17
    Follow up: A local real estate law firm stated that because the second loan has a deed of trust, the deficiency law should apply. However, there have not been any cases specifically addressing this issue that set a precedent. There is also a 6-year statute of limitations on foreclosures which mortgagors always retain their rights.


    If I owe it that's fine. I'd just rather not pay it if it went away with the 1st.

  4. #4
    Join Date
    Sep 2010
    Posts
    8,649

    Default Re: Second Mortgage Liability After Foreclosure

    Actually, I'm going to retract what I said. I went back and read Arizona's statute (it's been a while, all I remembered is the 2 1/2 acres or less and one or two family houses and the fact the courts have applied it to individual condo units). It appears that as long as it's a deed of trust on an appropriate property, Arizona doesn't care either if it was purchase money or owner occupied (which are the requirements in California, for instance)

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