Arizona Foreclosure Laws & Regulations
A foreclosure occurs when a borrower is unable to meet the financial obligations established in the mortgage contract. Once this occurs, the lending agent has the right to reclaim the property and sell it to the highest bidder. Arizona foreclosure laws are based on the title theory. This holds that the lending agent owns the property until the mortgage has been paid in full.
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Judicial Foreclosure
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Arizona allows two foreclosure processes. A judicial foreclosure means that the lender must file a lawsuit against the borrower. Once the suit is filed, the court will set a deadline for the repayment of any delinquent amounts. If the borrower is unable to make the payments, then the home may be sold to the highest bidder.
Nonjudicial Foreclosure
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In Arizona, the lender has the ability to include a power of sale clause in the mortgage contract. This clause allows the lending agent to foreclose on a property without a court order if the borrower fails to meet his financial obligations. The lending agent generally appoints a representative, also known as a trustee, to oversee the foreclosure process.
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Power of Sale
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The power of sale clause usually stipulates all the details of the foreclosure auction. If this information is not included, then Arizona has certain minimum requirements that must be met. A notice of sale must be filed with the county clerk. A similar notice must be mailed to the borrower within five days of filing the notice. A newspaper ad, announcing the sale, must appear at least four consecutive weeks before the sale takes place. The last such notice must appear at least 10 days prior to the sale. The alternative to this is to post a notice on the property at least two days prior to the sale. This can only be done if doing so does create a breach of peace.
Deficiency
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A deficiency occurs when the auction yields less than the amount due on the loan. When this happens in Arizona, the lender may file a judgment against the borrower for the difference, if the property was more than 2.5 acres and was not a one- or two-family residence.
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