Question: I understand that in Arizona, deficiency judgements cannot be sought on purchase money loans, but what are the rules for second loans?
Answer: The rules are the same. If it is a true purchase money loan, then there is no possibility of a deficiency judgment. If it is a line of credit and money was used for something other than the purchase price of the house, then the possibility of a deficiency judgment action exists—unless the 2nd mortgage proceeds with a trustee sale. With that said, I do not believe that Banks are bringing deficiency actions against consumers. If it is a concern, however, I would recommend pursuing a short sale and making sure that if it is successful that the 2nd acknowledges that whatever money it receives is in full satisfaction of all debt.
February 26, 2009