ARIZONA FORECLOSURE PROCEDURE AND
FORECLOSURE DEFINITIONS

Arizona - Revised Statues Annotated, VoI4A, Title 12, Sections 12-1281 et seq.; vol. II, title 44, sections 33-721 et seq.

Judicial Foreclosure Available: Yes                            

Non-judicial Foreclosure Available: Yes

Trustee:   A trustee may conduct the foreclosure sale out of court under a power of sale clause if the borrower defaults on the loan. Alternatively, a trustee (or the lender) may sue to foreclose. A trustee may also sue the borrower for physical abuse to the property, waste, or other impairment of the security, but only so long as the borrower was in possession or control of the property when the damage was done. The trustee cannot conduct a foreclosure sale under the power of sale clause until a lawsuit to foreclose is dismissed. Under Arizona law, a bank, trust company, Savings & Loan or other institutional lender can be a trustee. Arizona licensed attorneys, real estate brokers, and insurance agents can also be trustees. The lender for any reason may appoint a substitute trustee if they record a Notice of Substitution of Trustee and mail a copy to the borrower. A trustee may resign by recording a Notice of Resignation of Trustee.

Preliminary Notice of Trustee’s Sale

Contents:  The trustee will give written notice of the time and place of sale including legal description of the property, by each of several methods.

Recording:  The trustee must record a notice of the sale in the county recorder’s office in the county where the property is located.

Advertising:  Once a week for four consecutive weeks, the notice must appear in a newspaper in the county where the property is located. The last notice must be published not less than ten days prior to the date of the sale.

Posting: (1) If it can be done without a breach of the peace, the trustee can post the notice at least 20 days prior to the date of the sale, in some conspicuous place on the property to be sold. (2) He or she can post the notice at the courthouse or at a specified place at the place of business of the trustee in the county in which the property is located.

Mailing:  The trustee or lender must mail, within five days after recording the notice of sale, by certified mail, a copy of any notice of sale to each of the persons who are parties to the trust deed except the trustee. It must be addressed to the mailing address specific in the trust deed. The notice must set for the nature of the borrower’s breach or nonperformance under the trust deed. In addition, any person will be entitled to receive a copy of the trustee’s foreclosure notice if such a person records a statutory Request for Notice form.

Special Procedure: For a fee up to $20, the trustee can provide information on the unpaid balance, the name and address of the owner, the date the trustee’s notice was recorded and a list of encumbrances. A trustee must honor a written request, and may honor an oral request.

Sale Procedures: Time and Place-The time and place of the foreclosure must be designated in the notice of sale.

Manner of Sale: The trustee or the trustee’s agent must conduct the sale. The sale is for cash to the highest bidder, except that the lender can make a "credit bid," which means to cancel out some part (or all) of the money the borrower owed the lender on the lean, instead of paying cash. A successful high bidder must pay the bid price by 5p.m. of the day after the bid, other than a Saturday or legal holiday. Every bid is an irrevocable offer until the sale is completed, which happens when the bidder pays the bid price to the trustee’s satisfaction. If the high bidder fails to make the payment b 5:00 p.m., the day after being notified of the option to buy, then the trustee may postpone the sale.

Postponement:  The trustee may postpone the sale to another time, or another place, by giving notice of the new date, time and place by public declaration at the last place and time the property was offered for sale. No other notice is required. A trustee may also, by written agreement, extend the time for a buyer to come up with the payment.

Post-Sale Matters:  The sale proceeds will go to the payment of the obligations secured by the trust deed that was foreclosed, then to junior lien holders in order of their priority. The successful bidder gets a trustee’s deed, which constitutes conclusive evidence that the trustee conducted the foreclosure sale property.

Deficiency:  An Arizona deed of trust permits the real estate that is the collateral for a loan to be sold at a foreclosure sale by a trustee. The proceeds of the sale will be paid to the lender, or the lender can take title to the property and cancel out the debt in exchange for the deed, called a "credit bid." Under a new Arizona law, a lender may not bring a subsequent deficiency suit against a person who lost a property that is 2.5 acres or less at a foreclosure, provided the property was a single one-family or a single two-family dwelling. This is so even if the high bid at foreclosure was less that the balance due on the loan. In foreclosures against other types of property, a deficiency is limited to the difference between the balance owed and the fair market value of the property, and then only if the suit is brought within 90 days of the power of sale foreclosure.

Redemption:  Arizona does not recognize a subsequent right of redemption on foreclosure sales.

FORECLOSURE DEFINITIONS:

Notice of Default (NOD): The initial document (non-judicial) filed by a trustee that starts the foreclosure process, usually after the occurrence of a default under the deed of trust, or mortgage.  Both LIS and NOD are part of the PRE-foreclosure process.

Lis Penden (LIS): Notification of pending lawsuit. The initial document (judicial) filed by an attorney or trustee that starts the foreclosure process after the occurrence of default under the deed of trust or mortgage. Both LIS and NOD are part of the PRE-foreclosure process.

Notice of Trustee's Sale (NTS): A filing by notice announcing a public auction.

Notice (Judgment) of Foreclosure Sale (NFS): An order signed by a judge, directing a “Notice of Sale” be published and that a referee (trustee) sell the property at public auction.

Real Estate Owned (REO): “Real Estate Owned” by the lender; the final step in foreclosure process. This document conveys property ownership back to lender.

Pending: One of two transition periods between documented filings of foreclosure,(either between NOD/LIS and NTS/NFS or NTS/NFS and REO) when a property has satisfied the time requirement specific to the most recent phase of foreclosure, but The Lead Store has yet to receive any information that the property has entered the next stage of foreclosure.

History of Notices: Listing of other foreclosure notices posted on The Lead Store for the same property.

Glossary of Terms:

Foreclosure: A legal procedure by which mortgaged property is sold, upon default, in order to satisfy a debt. Foreclosures generally are governed by state law, and rules may vary between States.  

Deed of Trust: A type of security instrument where the borrower conveys the property’s title to a third party (trustee) to be held “in trust” as security for the note.

Mortgage: A conveyance of an interest in real property, given as security for the payment of a debt. An agreement between two parties: borrower and lender.

Assignment of Deed of Trust or Mortgage: Assumption by a purchaser of liability for payment of an existing mortgage, or deed of trust. May or may not be accompanied by a release of liability of the original borrower.

Novation: The substitution of a new contract between the same, or different parties; a substitution, by mutual agreement, of one debtor for another, or one creditor for another. The result is that the old contract is extinguished, and a new contract is created, usually with the same content, but with at least one different party.

Declaration of Default: a document instructing the trustee (usually appointed by a bank) to prepare and record a Notice of Default (NOD), and if necessary, to sell the property at auction in order to satisfy the unpaid obligation or lien.

Full Reconveyance: a document prepared by a trustee, when an obligation secured by a deed of trust, or mortgage, is paid back in full.  Once recorded, this reconveyance eliminates the lien from the property’s title.

Junior Lien: a legal claim upon real property recorded subsequent to (after) another claim or legal obligation (for example, a senior lien would have priority in most cases).

Postponement: a verbal announcement made at the time and location of the scheduled trustee’s sale, resetting the auction for a later date.

Publication Letter: a letter, when signed by the beneficiary (lender), authorizing the trustee to prepare, publish and record the Notice of Trustees Sale (notice of auction).

Publication Period: a period beginning at the expiration of the default period, and ending when the trustee’s sale has been conducted.  During the publication period, the Notice of Trustees Sale is published, posted and recorded.

Recession of Notice of Default: After an amount in default has been cured, or paid-back, this document, when signed by the lender and recorded by the trustee, removes the burden of the previously recorded Notice of Default.

Reinstatement Period: The time period beginning when the Notice of Default is recorded, and ending five business days before the trustee’s auction sale. The default may be cured, or paid-back, at any time during this period by paying all delinquent amounts, including the trustee’s fees and costs.

Foreclosure Timeline:

Day 1: Notice of Default recorded. The defaulting property owner has 3 calendar months to cure, or payback the default amount, either by paying off the lien, or by negotiating a payment plan

Within 10 days: Notice of Default mailed.

Within 1 month: Notice of Default mailed.

3 Months Later: Trustee schedules a Trustee's Sale (auction).

21 days later: On the date of sale, trustee sells the property to the highest bidder. This sale is usually held at the trustee's office, or at the County Courthouse (call trustee for updates on time, date, place).

The information above was gathered from sources deemed reliable and is intended for informational purposes only. Please consult official assessment records. State and county terms and policies may vary so consult your local bylaws.

THE HOME STORE & LEAD STORE Inc. © Copyright 2006

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