A new law has created a stir among borrowers, lenders and real estate professionals. Interpretation is difficult, but SB 1271 clearly only benefits the banks. These are the same banks that were making the high risk loans which got us into this financial mess in the first place. The people most hurt by the new law will be individual investors – the little guys.
A perfect example is people who own a vacation home in addition to their primary residence. It is not uncommon for somebody to have a chunk of Gilbert real estate as well as a cabin up north. If the homeowner runs into tough times, for example the loss of a job, the first property they will lose will likely be the vacation home. Under the new law the lender for the vacation home could go after the primary residence of the borrower!
The same scenario holds true if you own the home you live in as well as a rental property. What if your renters move out and you can’t find new renters quickly? If the rental property forecloses, the banks can come after the home you live in.
So real estate lobbyists and the Arizona Association of Realtors are scrambling to get the new law that would make homeowners liable for tens of thousands of dollars on homes lost to foreclosure killed before a Sept. 30 deadline. Let’s hope they succeed.
Breaking news: HB 2008 which contains a repeal of SB 1271, the anti-deficiency legislation just passed House Appropriations.