Arizona home loans - are they recourse or non?

the · 03-14-2008, 08:51 AM

An aquaintence did a very silly thing in Arizona. And now is a big time "bag holder."

So the question is, what are the rules for investment home loans in Arizona, as far as recourse? If the bank forecloses, can they still come after the owner?

There are several houses involved. Some have one purchase money loan, others have been refinanced.

Joeaksa · 03-14-2008, 09:28 AM

Sorry to hear this. Which town? Tucson is a lot better than Phoenix.

Far too many SoCal investors came in and really did the deed on Phoenix and its now hurting.

the · 03-14-2008, 09:37 AM

I think mostly the Gilbert/Chandler area. It's a bloodbath.

Joeaksa · 03-14-2008, 12:05 PM

Scottsdale is hit hard, as are some other sections of the city. Gilbert and Chandler are not as bad as some other areas.

Dueller · 03-14-2008, 12:18 PM

I did a quick search and did not find any law in the Az statute that made residential loans non-recourse. I would be surprised if I had found anything. The loan contract would be controlling. I cannot imagine it being non-course.

turbo6bar · 03-14-2008, 12:22 PM

I really doubt these are non-recourse, especially on investment properties. There is little motivation for a legislature to pass laws protecting investors. Even CA does not protect investors and those who refinance.

jorian · 03-14-2008, 12:34 PM

I would think that the answer lies in the mortgage contract. If your friend is the lender/mortgagee he should have a copy which contains terms, conditions and recourse should the loan go into default.

Each jurisdiction has mortgage terms that will be recognized and upheld in court IF the mortgage contract in default does not contravene those terms.

Mortgages are registered in priority - 1st 2nd 3rd etc. What mortgage does your friend hold?

Non-recourse financing is brutal from a mortgagee's standpoint and I can't understand why any lender would offer them. Remember the S&L debacle from the 80's? Many of those loans were non-recourse. If your friend bought an existing mortgage that was non-recourse then he is stuck with those terms. If he originated the loan himself he only has himself to blame.

the · 03-15-2008, 07:26 PM

Quote:

Originally Posted by Dueller

I did a quick search and did not find any law in the Az statute that made residential loans non-recourse. I would be surprised if I had found anything. The loan contract would be controlling. I cannot imagine it being non-course.

Just to update this, I did some searching, and found that home loans are in fact non-recourse, by Arizona statute (and case law interpreting and in fact expanding it). I can give the specific cites on Monday if anyone is interested.

Arizona home purchase money loans are non-recourse, as long as the lot is less than 2.5 acres. The AZ S. Ct. even specifically ruled that it doesn't matter if it is an owner or investor.

The rules are pretty liberal. I know in California, if you refinance, you lose the non-recourse statute. In Arizona, even if you refinance, the loan retains it's non-recourse status.

the · 07:34 PM

Quote:

Originally Posted by jorian

Non-recourse financing is brutal from a mortgagee's standpoint and I can't understand why any lender would offer them. Remember the S&L debacle from the 80's? Many of those loans were non-recourse.

That doesn't make much sense to me.

Home lenders "offer" non-recourse home loans because they have no choice.

Most states have anti-deficiency (i.e., non-recourse) statutes which govern loans secured by real property located within their state. Those statues make the loans non-recourse, as a matter of law.

Hugh R · 03-15-2008, 07:32 PM

Cool, my wife and I are flush with cash and thinking about a second house. I can't afford the Ventura or Santa Barbara Coast, so we're thinking Tuscon, eff Phoenix. I love the area north of Tuscon towards the biosphere.

the · 03-15-2008, 07:36 PM

Quote:

Originally Posted by Hugh R

Cool, my wife and I are flush with cash and thinking about a second house. I can't afford the Ventura or Santa Barbara Coast, so we're thinking Tuscon, eff Phoenix.

Before going to Az, you may want to wait a bit for the collapse in SB and Ventura to continue. Prices are pretty much declining by the thousands every day.

the · 03-15-2008, 07:38 PM

Hugh R · 03-15-2008, 07:51 PM

I'm a little color blind, but from that chart, it looks like average housing costs in Ventura are higher than Los Angeles County, and that Santa Barbara is on par with LA. That is definitely not my understanding of the market. If it is. I'm buying in Santa Barbara, baby, (NOT ).

jorian · 03-15-2008, 10:16 PM

Quote:

Originally Posted by the

That doesn't make much sense to me.

Home lenders "offer" non-recourse home loans because they have no choice.

Most states have anti-deficiency (i.e., non-recourse) statutes which govern loans secured by real property located within their state. Those statues make the loans non-recourse, as a matter of law.

Non-recourse doesn't exist here in BC. I can't imagine lending under those circumstances. I suspect that non-recourse applies only to purchases and not refi's. Anti-deficiency statutes really only exacerbate security issues and are another nail in the coffin of responsibility as it relates to borrowers. The credit crunch I see here in Canada is direct result of lending practices like these. For reasons like these, I don't lend in the US.

turbo6bar · 03-16-2008, 04:59 AM

Quote:

Originally Posted by the

Just to update this, I did some searching, and found that home loans are in fact non-recourse, by Arizona statute (and case law interpreting and in fact expanding it). I can give the specific cites on Monday if anyone is interested.

Arizona home purchase money loans are non-recourse, as long as the lot is less than 2.5 acres. The AZ S. Ct. even specifically ruled that it doesn't matter if it is an owner or investor.

The rules are pretty liberal. I know in California, if you refinance, you lose the non-recourse statute. In Arizona, even if you refinance, the loan retains it's non-recourse status.

Wow!!! Arizona real estate is in for the bust of a millennium. It's no wonder this was a hot spot for speculators. Wow!

John_AZ · 06:24 AM

Quote:

Originally Posted by Hugh R

Cool, my wife and I are flush with cash and thinking about a second house. I can't afford the Ventura or Santa Barbara Coast, so we're thinking Tuscon, eff Phoenix. I love the area north of Tuscon towards the biosphere.

HughR, TUCSON-TUCSON-or was that on purpose?

Research Tucson before you decide on which AZ city. Spend a few days at one of the large resorts in Tucson or nearby cities. The area is known as the "Old Pueblo". If you are near the retirement age, you are in good company. A lot of military.
I lived in Tucson for a few years going to University of Arizona-UA. I got a job and moved to the outskirts-Oro Valley-better, near to the biosphere. Tucson has a lazy, sleepy, laid back feel, waiting to die atmosphere.

I moved north and after a couple of houses found paradise in the Cave Creek/Carefree/N. Scottsdale/N.Phoenix area.

I would not "flush my cash" in Tucson. And yes, wait a while.
My 2c.

Additional thought-Fountain Hills area. Nearby and growing but upscale-tallest fountain in USA (?). Will be green on St. Patrick's Day. Some of the houses have foundation issues-shifting. Overall good area to be in.

John_AZ