Law Off of D.L. Drain P.A., Arizona Bankruptcy Lawyer | "Helping You Get Your Life Back on Track"
Law Off of D.L. Drain P.A., Arizona Bankruptcy Lawyer | "Helping You Get Your Life Back on Track"
AZ Foreclosure FAQsSite Producer2023-12-26T09:16:05-07:00

Arizona Judicial Foreclosure Questions

AZ Judicial Foreclosure FAQs

On this page you will find answers to frequently asked questions about Arizona judicial foreclosure topics. I recommend taking the time to go through each of the topics below to learn more about Arizona foreclosure.

REDEMPTION and JUNIOR LIENHOLDERSDiane Drain2022-08-29T16:05:21-07:00

Helvetica Servicing Inc. v. Giraudo, 1 CA-CV 15-0490 2/9/17 The redemption price for a junior lienholder is the sale price of the secured property plus the outstanding value of the senior lienholder’s allowable deficiency judgment. If a property is subject to two deeds of trust and the senior lienholder purchases the property at a foreclosure sale without joining the junior lienholder, the junior lienholder may seek to redeem the property under A.R.S. § 12-1285(B).

The redeeming junior lienholder is not required to pay any portion of the senior lien that is unenforceable against the judgment debtor under the statutes.

12-1282. Time for redemption

  1. The judgment debtor or his successors in interest may redeem at any time within thirty days after the date of the sale if the court determined as part of the judgment under which the sale was made that the property was both abandoned and not used primarily for agricultural or grazing purposes.
  2. The judgment debtor or his successor in interest may redeem at any time within six months after the date of the sale except when the court has made the determinations as provided in subsection A.
  3. If the redemption as provided in subsection A or B is not made, the senior creditor having a lien, legal or equitable, upon the premises sold, or any part thereof, subsequent to the judgment under which the sale was made, may redeem within five days after expiration of the applicable period provided in subsection A or B, and each subsequent creditor having a lien in succession, according to priority of liens, within five days after the time allowed the prior lienholder, respectively, may redeem by paying the amount for which the property was sold and all liens prior to his own held by the person from whom redemption is made, together with the eight per cent added to the amount as provided in section 12-1285.


Bankruptcy related: Most likely fee remains property of the estate until the foreclosure judgment is entered, after which the right to redeem is what remains property of the estate (see ARS § 12-1281 to -1289 (esp. -1282 and -1283(A)), but there’s a pair of older case saying that title doesn’t pass to the purchaser until after the redemption period passes, In re Sapphire Investments, 27 B.R. 56 (Bankr. Ariz. 1983), and that this period can be extended. In re Sapphire Investments, 19 B.R. 492 (Bankr. Ariz. 1982).

ACCELERATION OF DEBTDiane Drain2022-08-29T15:03:48-07:00

Without evidence of an intent to accelerate, merely recording a notice of trustee’s sale does not accelerate a debt.

Bridges v. Nationstar Mortgage LLC1 CA-CV 19-0556, 1/14/21., A note and deed of trust contained an acceleration clause granting the lender the power to accelerate the debt upon the borrower’s default. When a creditor has the power to accelerate a debt, the six-year statute of limitations begins to run on the date the creditor exercises that power. To exercise its option to accelerate a debt, the creditor must undertake some affirmative act to make clear to the debtor it has accelerated the obligation. Merely recording a notice of trustee’s sale, without reference to acceleration, is insufficient notice and does not trigger the statute of limitations.


Miller Designs v. US Bank et al.  CA-CV 16-0723, 244 Ariz. 265, (AZ Court of Appeals, Div. One, 2/13/18)

Holding:   :  (1)  A  purchaser of   real  property   acquired at an execution sale under Arizona Revised Statutes (“A.R.S.“) section 12-1622 has standing to assert a statute of limitations defense under A.R.S.  §  33-816 and no  additional  contractual  privity  is  necessary;  (2) a creditor may unilaterally revoke its acceleration of debt; (3) unilateral revocation of the debt’s acceleration requires an affirmative act by the creditor, which must communicate to the debtor that the debt’s  acceleration has been cancelled; (4) a notice of cancellation of the trustee’s sale may be an affirmative act by the creditor sufficient to communicate to the debtor, and to any third party investigating title to the property, that the creditor cancelled the debt’s acceleration if it contains a statement revoking the acceleration; and (5) recording the notice of cancellation of trustee’s sale with language revoking the acceleration constitutes sufficient notice that the creditor has revoked the debt’s acceleration.

Because Bank inserted the Acceleration Revocation Clause into the Notice  of Cancellation, it sufficiently communicated to the  Borrower,  and to any third party investigating title to the property, that Bank was also revoking the debt’s acceleration. Acceleration of note starts the clock for six year statute of limitations to complete trustee’s sale.  Affirmative act by lender de-accelerating a prior acceleration of a note restarts the statute of limitations. An acceleration revocation clause in the recorded notice of cancellation of trustee’s sale held sufficient affirmative act. Because the acceleration’s revocation reset the statute of limitations  the court found that the statute of limitations regarding future obligations has not run.

MORTGAGE DEFICIENCIESDiane Drain2022-09-21T10:55:57-07:00

If the loan document is a mortgage, the next few questions are about the property.

Did you borrow the money to buy the property? Is it a dwelling? Is it on 2 ½ acres or less? Is the property used as a one or two family dwelling? If the answer is “yes” to all 4 questions – then A.R.S. Section 33-729(a) prohibits the lender in seeking a deficiency once they complete their judicial foreclosure of the real property. PNL Credit LP v Southwest Pacific, 179 Ariz. 259, 877 P.2d 832 (App. 1994) (anti-deficiency does not apply to more than two single family units). Mid Kansas Fed. Sav. & Loan v Dynamic Dev. Corp, , 163 Ariz. 233, 787 P.2d 132 (App. 1989) vacated, 167 Ariz. 122, 804 P.2d 1310 (1991) & Northern Arizona Properties vs Pinetop Properties, 151 Ariz 9, 725 P.2nd 501 (App. 1986) (can be investment property, no owner need to occupy. – BUT SEE NOTE BELOW). Independent Mortgage Company vs Alaburda and Warner, 1 CA-CV 11-0301 (Ct. App., 7/17/12) ( 1/10 fractional interest in Sedona condo still a dwelling even if short term occupancy and does not matter how many families live there at a time. Cely v. Deconcini, 166 Ariz. 500, 803 P.2d 911 (App. 1990) (using one home as collateral for purchase of second home is not purchase money debt).

NOTE: As of December 31, 2014 ARS 33-814 changed this result.  Investors and partially completed property is no longer protected by the Arizona Anti-Deficiency Flow Chart (124 downloads) statute.

Bank One v Beauvais, 188 Ariz. 245, 934 (P2.d 809 (App. 1997) (consolidated loan including purchase money debt ($240,000) and non-purchase money ($75,000) still retains purchase money protection. Later workout note retains character of purchase money for the purpose of anti-deficiency. Note: the original and workout loans were with same lender and it appears that the original loan was modified, not released.). “In summary, we hold that regardless of whether the workout note was an extension, renewal, or refinancing of the 1989 consolidated loan, it retained its character as a purchase-money note. See Lucky Invs., Inc. v. Adams, 183 Cal.App.2d 462, 7 Cal. Rptr. 57 (1960) (Cancellation and replacement with new notes, secured by the same property, transfers purchase-money status to new notes.). Accordingly, the Bank is prohibited from waiving the security under the deed of trust and suing on the note. We affirm the trial court’s dismissal of the Bank’s complaint”, at 816.

This is just a sampling of cases, others may change the outcome of any questions.  MAKE SURE TO DO YOUR OWN RESEARCH.


Resolution Trust Corp. v. Segel, 173 Ariz. 42, 839 P.2d 462 (App.1992), we examined the impact of the Baker holding on non-purchase-money loans that were secured by second-position deeds of trust on residential property of less than two and one-half acres with a one- or two-family residence. In Segel, the court held that because the lender did not institute trustee’s sale proceedings and the deeds of trust secured non-purchase-money obligations, the lender was entitled to waive its security and sue directly on the notes under A.R.S. section 33-722. Id. at 44-45, 839 P.2d at 464-65.

Suit on the note: Following a judicial foreclosure by a senior lienholder, a junior lienholder can sue on Note (unless property is anti-deficiency in character) A.R.S. 33-722 Wells Fargo Credit v Tolliver, 183 Ariz. 343, 903 P.2d 101 (App. 1995). Lender may waive its security in the real property and sue on the note. Darnell v. Denton, 137 Ariz. 204, 669 P.2d 81 (App. 1990). Also, foreclosure of a senior lien extinguishes the junior lien, therefore no need to “release” the junior lien. Wells Fargo, supra. Lender may not sue on the Note so long as the property fits within the anti-deficiency statutes (dwelling, 2 ½ acres or less, one or two family dwelling – ARS Section 33-814) Baker v. Gardner, 160 Ariz. At 105, 770 P.2d at 773 (1988) (first and second purchase money debts). First lender noticed trustee’s sale and second (Bakers) elected to sue on Promissory Note). Clarification in a supplemental opinion that the court did NOT mean to prohibit the non-PMSI creditor from waiving the security and suing on the note.

Suit on Promissory Note or “Show me the Note”: A lender may waive their lien on real property and sue on the Promissory Note. That waiver is an “abandonment and release” of the lien and must be “evidenced by a recorded release of the lien”. ARS Section12-1566(F) All limitations of Baker v Gardner and Mid Kansas apply. But see: Smith v. Mangels, 240 P.2d 168 (1985) and Deming v. Walraven, 651 P.2d 1203 (App. 1982) (Mortgage not waived by going to judgment on the Note)

Lender accepts less than what is owed on residential property, releases deed of trust, then sues borrower for deficiency. TANQUE VERDE ANESTHESIOLOGISTS, L.T.D. PROFIT SHARING PLAN, 836 P.2d 1021, 172 Ariz. 311 (App. 1992) “Although no trustee’s sale occurred in this case, we agree with Proffer (borrower) that, based on the holdings of Baker, supra, and Mid Kansas, supra, and absent evidence of an agreement to the contrary (emphasis added), when Tanque Verde (lender) signed the deed of release and reconveyance, it thereby waived its right to seek a deficiency judgment.” ((The assuming lender (Tanque Verde) signed the deed of release and included in the release language that the borrower is not released on the underlying debt. The borrower (Proffer) did not sign the deed of release. Nor, was there any other signed agreement where the borrower acknowledged that the debt was not released. Correct conclusion. This outcome will be different for short sales because there is almost always a new contract which details the agreement between the seller and the lender. That short sale contract is signed by the seller/borrower, therefore will be binding on the seller/borrower.


Helvetica Servicing Inc. v. Pasquan  Arizona Supreme Court, 8/25/20 (the 5th appeal). To resolve the fact question of whether a residential purchase money loan is a construction loan or a home improvement loan, the Arizona Supreme Court held that a trial court must consider the totality of the circumstances surrounding the loan. Here, the Court identified five non-exclusive factors indicating whether a loan is a construction loan for purposes of anti-deficiency protection under A.R.S. § 33-729(A): (1) whether there was a complete or substantially complete demolition of an existing structure and a new building constructed in its place; (2) the intent of the parties when executing the loan documents; (3) whether the structure was inhabitable or inhabited during construction; (4) whether the structure was largely preserved and improved or substantially expanded; and (5) whether the project is characterized as “home improvement” or “construction” in the loan documents and in the permits or other official documents. The distinction between the loans is significant because statutory anti-deficiency protection is afforded to construction loans but not to home improvement loans – so lenders may not seek a money judgment against the borrower over a construction loan.

Baker v. Gardner Ariz.,1988. 770 P.2d 766 Holder of purchase money note and trust deed on premises sought to bring suit to collect on note and waived security deed of trust. The Superior Court, Maricopa County, No. C-587681, Michael J. O’Melia, J., found action precluded by anti-deficiency statute. On appeal, the Court of Appeals reversed in a memorandum decision. The Supreme Court, Feldman, V.C.J., held that: (1) holders of purchase money note and security device could not hold maker liable for entire unpaid balance by waiving security, and (2) election of remedies could occur except where anti-deficiency statute applied.

Cely v. DeConcini, McDonald, Brammer, Yetwin & Lacy, P.C., 166 Ariz. 500, 505, 803 P.2d 911, 916 (App.1990). A “purchase money mortgage” for purposes of Arizona’s anti-deficiency statutes is one that encumbers the property being sold.

Junior wiped out by senior’s foreclosure or trustee’s sale – NO DEFICIENCY if also purchase money lien Nydam v. Crawford, 181 Ariz. 101, 887 P.2d 631 (App. 1994). DEFICIENCY – consolidated second loan, used to pay off original second, plus credit cards, etc. Am. Gen. Fin.Serv. V. Dinwiddie, 2008 WL 4182862 (Ariz. Ct. Apps. 2/26/2008) (unreported)

Multiple lenders with multiple notes: Junior lender can sue on Note after foreclosure by first lender unless property is purchase money, 2 ½ acres or less and utilized as a one or two family dwelling. Wells Fargo Credit v Tolliver, 183 Ariz. 343, 903 P.2d 1101 (App. 1995); W.D. Lang v Corbet, 181 Ariz. 153 (888 P.2d 1340 (App. 1994) (junior could pursue sue on note and collect excess sale proceeds from sale of first lender).



Helvetica Servicing, Inc. v. Gold, No. 1 CA-CV 11-0100 deals with redemption rights after judicial foreclosure. One defendant requested fair market value determination which exceeded the price Helvetica bid at the sheriff’s sale. Thus protecting both borrowers from a deficiency claim. Court would not allow the other defendant to get the protection of the fair market value AND be able to redeem the property. “We hold that ARS 12-1566(c) operates to eliminate all rights of redemption when any debtor applies for an FMV determination.”

VA RESIDENTIAL LOANS AND DEFICIENCYDiane Drain2022-08-29T15:28:52-07:00

VA Loans: DEFICIENCY allowed. Connelly v.J Dervinski, 961 F.2d 129 (9th Cir, 1991) Once again we are asked to determine, once again, whether a state anti-deficiency scheme is preempted by Department of Veteran Affairs (VA) regulations that authorize the VA to collect deficiencies on VA-guaranteed home loans. This case involves Oregon law, which forbids a deficiency judgment after either a judicial or a non-judicial foreclosure sale. See Or.Rev.Stat. § 86.770(2). Same result in Shepherd v. Dervinski, 961 F.2d 132 (9th Cir, 1992) (an Arizona case) also see In United States v. Rossi, 342 F.2d 505 (9th Cir.1965), we held that a California anti-deficiency law, which in all material respects is identical to Oregon law, is preempted by the VA regulations. Id. at 506. Subsequently, in Whitehead v. Derwinski, 904 F.2d 1362 (9th Cir.1990), we held that a Washington anti-deficiency law, which permits a deficiency judgment after a judicial, but not a non-judicial sale, is not preempted by the VA regulations. Id. at 1369. In Whitehead, we distinguished the Washington anti-deficiency law from the California anti-deficiency law. Id. at 1368. Because the Oregon anti-deficiency law is materially different from the Washington anti-deficiency law, but identical to the California anti-deficiency law, we hold that this case is controlled by Rossi and that the Oregon law is preempted by the VA regulations.

It is evident that a state’s anti-deficiency statute is irrelevant to VA-guaranteed home loans. This is consistent with the basic principle that federal law governs the rights of private citizens who contract in loans transactions with the United States. United States v. Kimbell Foods, Inc., 440 U.S. 715, 727, 99 S.Ct. 1448, 59 L.Ed.2d 711 (1979). There is nothing to suggest that this principle and the analysis undertaken in Carter would not also apply to other federal loan programs. See United States v. Einum, 821 F.Supp. 1283, 1284 (W.D.Wis.1992) (FmHA loans).

U.S. v. Rezzonico, 32 F. Supp. 1112 (D.Ct. Ariz. 1998) that sheds a little more light on the issue. In that case the FmHA guaranteed the loan, and the court follows Carter v Derwinski, 987 F.2d 611 (9th Cir.), a case in which the court held that “the VA always has a right of indemnity against the veteran for the amount of guarantee paid to the lender….[t]he VA’s right to indemnity derives from a contract independent of the mortgage. As indemnitor the veteran is in the same position as the guarantor….” Rezzonico, at 1115 (quoting Carter, 987 F.2d at 616-7). The Rezzonico court applied the same reasoning to the FhMA as the line of cases finding no preemption with respect to the VA.
Throw Cippolline, Medtronic, and the Chevron two part defenses into the mix and you have a first class briefing nightmare on any preemption issue. Predicting the outcome in these cases is anybody’s guess.

Servicemembers Civil Relief Act (SCRA) (this may be out of date – check the current law)
Section 303 – Mortgages and trust deeds

(a) MORTGAGE AS SECURITY- This section applies only to an obligation on real or personal property owned by a servicemember that–
(1) originated before the period of the servicemember’s military service and for which the servicemember is still obligated; and
(2) is secured by a mortgage, trust deed, or other security in the nature of a mortgage.

(b) STAY OF PROCEEDINGS AND ADJUSTMENT OF OBLIGATION- In an action filed during, or within 90 days after, a servicemember’s period of military service to enforce an obligation described in subsection (a), the court may after a hearing and on its own motion and shall upon application by a servicemember when the servicemember’s ability to comply with the obligation is materially affected by military service–
(1) stay the proceedings for a period of time as justice and equity require, or
(2) adjust the obligation to preserve the interests of all parties.

(c) SALE OR FORECLOSURE- A sale, foreclosure, or seizure of property for a breach of an obligation described in subsection (a) shall not be valid if made during, or within 90 days after, the period of the servicemember’s military service except–
(1) upon a court order granted before such sale, foreclosure, or seizure with a return made and approved by the court; or
(2) if made pursuant to an agreement as provided in section 107.

(1) MISDEMEANOR- A person who knowingly makes or causes to be made a sale, foreclosure, or seizure of property that is prohibited by subsection (c), or who knowingly attempts to do so, shall be fined as provided in title 18, United States Code, or imprisoned for not more than one year, or both.
(2) PRESERVATION OF OTHER REMEDIES- The remedies and rights provided under this section are in addition to and do not preclude any remedy for wrongful conversion otherwise available under law to the person claiming relief under this section, including consequential and punitive damages.


Can Borrower Waive Anti-deficiency Protection? No, as determined in Parkway v. Zivkovic, 1 CA-CV 12-0612 (7/2013) This appeal presents the issue whether the anti-deficiency protections afforded by Arizona Revised Statutes (A.R.S.) section 33-814(G) (Supp. 2012) may be prospectively waived by the trustor. Because we conclude that such protections serve an important public purpose and may not be waived, we vacate the partial summary judgment for Parkway Bank and Trust Company (Parkway) and remand for proceedings consistent with this Opinion.

PRIORITIES FOR COLLECTING DEFICIENCYDiane Drain2022-08-29T15:42:08-07:00

Arizona Revised Statutes, Section 12-1566(D), requires a creditor collecting on a deficiency to proceed first against all other real property of the debtor before proceeding against the debtor’s primary residence. This law does not apply when the mortgage or deed of trust is a consensual lien. A.R.S. Section 33-964(B). Except as provided in section 33-1103, a recorded judgment shall not become a lien on any homestead property. Any person entitled to a homestead on real property as provided by law holds the homestead property free and clear of the judgment lien.

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