Are you having trouble making your mortgage payments? Are you worried that the bank might foreclose on your home – but aren’t really sure how the foreclosure process even works?
Every state has different laws and regulations, and there are a few things to know about foreclosures in Arizona.
Title Theory & Deed of Trust
Arizona is a Title Theory state. This means that the property title remains “in trust” until your mortgage loan is fully paid off. Most people use the term mortgage universally, however the loan is actually a note.
A “deed of trust” is a deed wherein legal title in real property is transferred to a trustee, which holds it as security for the loan between the borrower and lender. The equitable title in a deed of trust remains with the borrower. The equitable title gives you the right to use the property as long as you don’t default on your loan.
The Power of Sale clause (found in your mortgage documents) gives your lender the right to sell the property if you don’t make the payments on your loan. Most foreclosures in Arizona are “non-judicial foreclosures,” which means that no courts, judges or authorities have to be involved in the process. Non-judicial foreclosures are generally quicker and less expensive.
Foreclosures in Arizona: Know the Steps
1. Homeowner defaults, or fails to make a mortgage payment.
Legally, a lender could begin the foreclosure process on the first day that the loan payment is considered late. In reality, it usually takes several months of missed payments for the lender to take action.
2. Notice of Trustee Sale (NOS) is filed.
When the lender decides to activate the foreclosure process, they will formally file a NOS. The homeowner may or may not receive a final warning (called a Notice of Default) before this happens, which would let them know that the home is about to enter the foreclosure process. There are numerous stipulations regarding how the NOS must be handled. Amongst other measures, a copy of the NOS must be delivered to the property address within five days of being filed. A copy may also be posted at the property itself.
The NOS includes information about when and where the property will be sold at auction – usually on the courthouse steps or at the trustee’s office. The sale must take place at least 90 days after the NOS is recorded. While some states offer a redemption period when homeowners can catch up on their loan payments and regain their home, foreclosures in Arizona provide no such period.
3. Trustee Sale takes place.
At the indicated time and place, the home is auctioned. If no bids are made or the minimum is not met, it becomes a “Real Estate Owned” home – this means that the bank now owns the property. The bank will then put the home on the open market. If the bid is met, the home becomes the property of the highest bidder within seven days.