Do You Have a Second For Michelle In Arizona?

Can a second mortgage change the status of the loan type from “secured” to “unsecured” and continue to report the payments as late after foreclosure in a state that has an anti-deficiency law?

Our situation is we bought property in Arizona, an anti-deficiency state if the loan(s) were used solely as purchase money.  We took out a first and second (80/20) all used to buy the property.  The property value was less than the balance of the first mortgage at the time it foreclosed, in March 2008.    The first mortgage company reported it as a foreclosure as of March 2008.  The second mortgage company changed the loan type from secured to unsecured and has continued to report it as a missed payment, more than 120 days late, every month since March 2008, so as of todays writing we have 21 late payments from this one company.

Thanks,
Michelle

————-

Hi Michelle,

I’ve written about Arizona’s anti-deficiency statute with regards to purchase money mortgages.  Further, in the Arizona Supreme Court case of Baker v. Gardner, 160 Ariz. 98, 770 P.2d 766 (1988) we read: “The holder of the note and security device may not, by waiving the security and bringing an action on the note, hold the maker liable for the entire unpaid balance.”  So, we know a creditor holding a purchase money second on a consumer’s primary residence which meets the criteria of 33-729, and 33-814(G) can’t collect through the courts after foreclosure. But can they report it on the credit report with a balance?

Well, there is a balance, so in and of itself, reporting a balance would be accurate.  I might be inclined to find something incomplete or inaccurate about the tradeline and dispute it with the CRA’s.  Either that or send a copy of the Baker v. Gardner decision along with an agreement to pay for delete for a fraction of the balance.

Thanks for the questions and hope this helps.

Paul

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