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Anti Deficiency Laws by State

Some states do not allow lenders to collect default judgments unless the lender follows a specific legal procedure. For example, lenders in California cannot sue a default judgment unless they use foreclosure. California requires lenders to choose between quick seizure in extrajudicial seizure or the ability to recover a default judgment through judicial seizure. Below is a general overview of how these laws work. For more information, see The Foreclosure Process and Foreclosure Fraud sections of FindLaw. Note that the laws are of each state. For example, California offers borrowers anti-deficiency protection, even if the borrower has their fourth mortgage. Other states will not be so lenient. Even if a state has anti-deficiency laws, they may not always be applicable in all situations. For example, anti-disability laws generally do not apply if: For example, if you own an apartment building on land of less than 2.5 acres and the building loses by foreclosure, you are still subject to a deficiency lawsuit under Arizona law. If you tapped into the equity by taking out a second mortgage on your property, this lender can also sue you for a default judgment because the money was not borrowed to finance the purchase of your home.

Article Bills.com How a deficit balance can affect you and the definitions below this table explain the terms used here. Contact a lawyer who has real estate experience to find out how your state`s rules are applied to the facts of your situation. Read your state`s laws to learn more about foreclosure and deficiency rights. Jason is a partner at Kronenberg Law PC, where he works as a consultant for businesses and owners. Previously, he advised clients in family law, inheritance and estate law and landlord-tenant law. Jason graduated from the University of San Francisco in 2015 and the University of California, Berkeley in 2010. Learn more about him on his LinkedIn profile. For general questions about the law, send an email to AntideficiencyActRep@gao.gov. A dozen states prohibit or restrict the collection of a deficit balance in connection with a home foreclosure. These are called anti-deficiency or no-recourse laws. Warning: Anti-deficiency laws are rarely simple or straightforward.

If your country of residence offers an anti-deficiency law, do not assume that you are unconditionally protected. Take the time to study your state`s laws in detail and consult with an experienced real estate attorney to answer your questions. Read the Bills.com`s enforcement laws for all U.S. states to learn more about foreclosure laws that are important to you. Visit the mortgage laws Bills.com page to learn more about the state laws that apply when you buy a home or refinance a home. Some states allow borrowers to waive default protection if the borrower is a guarantor of the loan. A guarantor is someone who agrees to pay the debt if the principal borrower or borrower who originally promised to pay the loan defaults. Anti-deficiency laws generally do not provide protection for second-grade pharmacies or HELOCs. There is also no protection if the property is not used as the buyer`s primary residence. For more information on the requirements of the Antideficiency Act, see Transmission of Antideficiency Act Reports to the Comptroller General of the United States B-304335, March 8, 2005 The following states have anti-disability laws: Alaska, Arizona, California, Connecticut, Hawaii Iowa, Minnesota, Montana, Nevada, New Mexico, North Carolina, North Dakota, Oregon, Washington, and Wisconsin.

When most families buy a home, they don`t imagine facing a foreclosure sale, but in states like Arizona, where the housing market has been particularly hard hit, foreclosure is all too common an event. In cases where a home has lost value, borrowers have two main concerns: the reporting obligations of the Anti-Deficiency Act apply to all violations, including those found by the GAO. Once the GAO has issued a decision or opinion concluding that a violation of the Anti-Deficiency Act has been committed, we will contact the appropriate authority to ensure a report of the violation. If the agency does not report the violation within a reasonable time, the GAO will notify Congress of the violation. Our report notes that the Agency did not report the breach. B-331295, September 23, 2019. First and foremost, a lender cannot sue a borrower for a default judgment if the sale price of the foreclosure is high enough to satisfy the outstanding mortgage balance. Arizona`s Anti-Deficiency Act is codified in sections 33-814.G and 33-729.A of the revised Arizona Statutes.

Section 33 prevents a lender from seeking a judgment of default after foreclosure if the mortgage was granted to purchase the home, if the property is less than 2.5 acres and less than two “housing units.” The heads of the agency and the mayor of the District of Columbia must provide the Comptroller General of the United States with a copy of the Antideficiency Act reports as soon as they are submitted to the President and Congress. If the mortgage is intended for the purchase of an apartment inhabited by the buyer, the buyer is not liable for a defect under the default laws. The lender can only recover the property and proceeds from a subsequent sale. The buyer does not pay a deficit between the proceeds of the sale and the outstanding balance of the loan. This allows the buyer to leave a property without having to owe a default judgment amount. In states where claims for default are allowed, bankruptcy usually extinguishes these debts. It`s important to keep in mind that while Arizona`s anti-deficiency laws are consumer-friendly, they are not uniform in their enforcement. Article 33 not only limits protection against default judgments to the purchase of cash mortgages and immovable property of less than 2.5 hectares, but also requires that the number of housing units not exceed two (2).

This restriction was introduced to protect owners from default judgments while classifying real estate investors separately from owners. Some states allow a homeowner who has seized their home for a certain period of time after foreclosure to pay off the mortgage and reclaim the property. In take-back states, it is common for the lender to buy back the owner`s redemption rights so that they can sell the property at auction without possible claims against the title. Borrowers generally cannot waive their right to use anti-disability laws if the borrower was the primary borrower of the loan. Anti-disability laws are a matter of public order and, therefore, private parties cannot waive anti-disability laws by contract or mutual agreement. If a State allows parties to waive protection against default, there must be an explicit law for that. Enforcement may be carried out in court, through the State judicial system or in private. Judicial enforcement means that enforcement is a judicial proceeding ordered by a court.

The lender must file a lawsuit – a lawsuit – against the owner. This process takes a lot of time and is subject to a sequence of events and calendars that take months or years to complete. A legal seizure helps by buying the owner time to make other housing arrangements. Check out the state`s foreclosure resources or talk to a real estate attorney for information specific to your state. Real estate issues related to foreclosure, mortgages and default judgments can often be confusing. If you have any questions or concerns about anti-disability laws, you should speak to a real estate lawyer right away.

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