Hat tip to Housing Doom on this one...
I smell the law of unintended consequences about to happen here...the state of Arizona, in their infinite wisdumb, have decided to make some mortgages into recourse mortgages (where you have to pay back the entire amount), a change from it being non-recourse. (where you just lose title to the home).
The new law would affect any Arizona homeowner in foreclosure who has not lived in the home for six straight months. This might include landlords, second-home owners and investors who bought homes hoping for quick resales and big profits. Once the home is sold in foreclosure, the homeowner would have to pay back the remaining value of the loan, minus the proceeds from the foreclosure sale. Currently, Arizona homeowners, including investors, who lose a house to foreclosure take a big hit on their credit scores but aren't usually required to pay back lenders.
Most refi's are recourse loans, so this isn't something new. Does it matter if the homeless man owes you $20 or $200,000 or $2 million? Uncollectible is uncollectible...
ReplyDeleteWhere this is going to really hurt is with higher income people that now, due to the changes in bankruptcy, are forced into Ch13 and are unable to discharge their debts.
I'm kind of ambivalent about this. So what that investors are going to get screwed. You want to play, you gotta pay. It's called accountability.
The part that really tweaks me is that no ex post facto laws are to be past. They are passing a law that changes what has already happened. You went out and received a no-recourse loan and now the state wants to violate your contract with the bank and change the terms. I hope they get called on this and find themselves at the wrong end of a title 42 sec 1983 suit...
My big thing is that this new law will speed up foreclosures and even those who may be capable of catching up are going to take a last ditch chance of getting out from under before the law changes
ReplyDeleteAgreed! It's time to call of your friends with investment properties in Arizona and tell them to RUN away from their vacant properties! For some of them it might be cheaper to move into the property for 6 months out of the year to benefit from the "loophole!"
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