Arizona Deficiency Judgment

My wifes house went into foreclosure in AZ. After the bank took the home back we figured her credit was ruined but at least we were done with it. 

Now the bank says she still owes money on the second because it was a HELOC.  She did an 80/20 with the second being a HELOC and they are telling us that the HELOC sticks with the person. 

How can that be if the HELOC was specifically for the 20% of the mortgage of the home? 

Wouldn’t the HELOC in this instance be tied to the house because it was used up at escrow to pay for 20% of the home?

John

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Hello John,

Yes, a HELOC used to purchase a property is considered a purchase money mortgage.

According to the National Consumer Law Center’s “Foreclosures” (6th Edition, Page 354):

“Deficiency: For purchase money mortgages for any one- to two-family home on less than two and one-half acres no deficiency, unless the court finds that the mortgagor committed waste.”

The homeowner commits waste if he destroys or harms the property while he is in possession.  The statutes cited are 33-729, and 33-814(G).  It appears the controlling case law may be Baker v. Gardner [Ariz.,1988 770 P.2d 766]. 

I would recommend you talk with an attorney and if you would be so kind, then report back so that we can add to this post.  As much as we try to help with credit issues, the Broken Credit Blog doesn’t substitute for an attorney and no legal advice is provided on this site.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney an this information should not be considered legal advice.  Please consult an attorney for legal advice.