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Arizona Foreclosures Hardly Affected by Debt Relief Extension

State law keeps the Arizona foreclosure process running as normal
 
Although many homeowners across the country were nervously awaiting the outcome of the Mortgage Forgiveness Debt Relief Act of 2007 expiration, the wait was anything but stressful for Arizona homeowners that understand the basis of non-recourse debt.
 

short sale tax

"Did you hear Betty? Those non-recourse loans are just splendid!"

The act, which previously allowed homeowners to avoid paying a federal tax on debt that has been “forgiven” by completing a short sale, foreclosure or loan modification, was extended in a last minute deal that was passed by Congress and signed by the president on Jan. 1. Because the debt relief act rarely applied to Arizona homeowners in the first place, however, foreclosures and short sales in Arizona will continue as normal.
 
Mike Orr, a real estate analyst at Arizona State University, and other experts agree that the impact will be minimal. Arizona is a “non-recourse state,” which means it has implemented a law that states in the event of a deficiency that has been forgiven through an Arizona foreclosure or short sale, lenders would have no recourse against the borrower, and borrowers would be exempt from taxation.
 
Arizona’s non-recourse law also covers home lenders – individuals who own multiple homes or earn profit through house flipping.
 
The only change that would have occurred in Arizona had the debt relief act expired is expiration on debt forgiveness of home improvement loans, which are not covered under the state law.
 
All non-recourse states, including California, Texas, Washington and others, will see similar affects (or non-affects) to Arizona. States that did not have such laws in place would have seen major consequences had the act not been renewed.
 
This content was originally posted by Tracy “Royce of Real Estate” on www.RoyceOfRealEstate.com/blog
 
Tracy is an Arizona Short Sale Realtor, Investor, Rehabber and Foreclosure Expert. She is also an avid blogger, vlogger, and consultant on all things Arizona Foreclosures.


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