A recent Arizona Court of Appeals case has clarified residential construction loan deficiencies by including certain residential construction loans under the Arizona anti-deficiency statute protection. Arizona homeowners, for the most part, are protected from their home mortgage lenders attaching other assets such as the cash in the bank, vehicles and jewelry following a foreclosure or trustee sale of their home. The lender is left to recover the residence and that is all. Aside from very certain circumstances such as when the homeowner damages the residence, the "anti-deficiency protections" have safeguarded Arizona homeowners for more than 25 years. One of the key requirements of Arizona's law is that the residence must be located on 2 1/2 acres or less and be limited to and utilized for a single one-family or two-family dwelling.
From 2004 to 2006, lenient lending requirements made it possible for many people to purchase a residence or to obtain funding for the construction of a residence. Some of those loans were obtained under false pretenses for the purpose of using the residence as an investment to rent to a third-party or to resell the residence to an end-user, commonly known as flipping. Such loans were not obtained for the purpose of buying or building the residence for the borrower to actually live in as the borrower's primary residence...
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