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Arizona and California both have what are known as anti-deficiency laws that provide protections for many homeowners on their mortgages in the event that homeowners have a financial difficulty that results in missed payments, delinquent payments, foreclosures, and/or short sales.
What are Anti-Deficiency Laws?
Anti-deficiency laws define what homeowners owe lenders on their mortgage in the event of a delinquency or foreclosure. These laws vary from state to state.
In California and Arizona, homeowners are typically not personally responsible to pay the balance of a home loan on which a foreclosure or a short sale occurs.
This means that if there is a home that goes through a foreclosure sale, the original owner is not obligated to pay the difference between what the home sells for and what is owed on the loan. For example, if the balance of the loan is $500,000 and the home sells for $450,000 in a foreclosure sale, the homeowner does not have to pay the $50,000 difference.
However, this typically only applies to first-lien home loans that were obtained at the time the homeowner purchased the property as a single-family residence. It may not apply to second mortgages. There are also other variables that come into play such as the size of the property.
California homeowners may be protected from how the foreclosure sale or the short sale appears on the homeowner’s credit report.
In Arizona, homeowners may also be protected from how late payments or delinquencies appearing on their credit reports.
The reason for this is that homeowners are not personally liable for the deficiencies on home loans according to the anti-deficiency laws.
Did your missed payment, foreclosure, or short sale in Arizona or California appear on your credit report? Tell us about it in the comments below.
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