In Arizona, anti-deficiency protection applies to:
Audio Lesson
Duration: 2:51
Question & Answer
Review the question and all answer choices
All mortgages
Anti-deficiency protection does not apply to all mortgages in Arizona. It specifically limits protection to purchase money loans on owner-occupied properties of 2.5 acres or less. Other types of loans, such as refinances or equity lines, are not covered by this protection.
Purchase money loans on owner-occupied 2.5 acres or less
Only FHA loans
FHA loans are not the only loans covered by anti-deficiency protection in Arizona. While some FHA loans may qualify if they meet the criteria (purchase money, owner-occupied, 2.5 acres or less), the protection applies more broadly to qualifying conventional loans as well.
Only VA loans
VA loans are not exclusively covered by anti-deficiency protection in Arizona. Like FHA loans, some VA loans may qualify if they meet the specific criteria, but the protection is not limited to VA loans and applies to qualifying purchase money mortgages regardless of loan type.
Why is this correct?
Arizona's anti-deficiency protection specifically applies to purchase money loans used to acquire owner-occupied residential properties of 2.5 acres or less. This protection limits a lender's ability to pursue a deficiency judgment after foreclosure for these specific types of loans.
Deep Analysis
AI-powered in-depth explanation of this concept
Anti-deficiency protection is a critical concept in Arizona real estate that significantly impacts both buyers and lenders. Understanding this rule helps agents advise clients on risk exposure during transactions and foreclosure situations. The question tests knowledge of Arizona's specific anti-deficiency statute (ARS § 33-731) which limits lender recourse after foreclosure. The correct answer (B) applies specifically to purchase money loans used to acquire owner-occupied properties of 2.5 acres or less. This question is challenging because it requires distinguishing between different types of loans and property uses. Many students incorrectly assume protection applies to all loans or only government-backed loans. The concept connects to broader real estate principles including foreclosure processes, lender rights, and consumer protection laws designed to balance interests between borrowers and lenders.
Knowledge Background
Essential context and foundational knowledge
Arizona's anti-deficiency protection stems from ARS § 33-731, which was established to protect homeowners from unlimited liability after foreclosure. This law recognizes that when a primary residence is foreclosed, the homeowner has already suffered significant financial hardship. The protection applies only to 'purchase money' loans—those used to acquire the property—not refinances or home equity loans. The 2.5-acre limitation distinguishes residential properties from larger parcels that might include agricultural or business components. This balance helps ensure lenders can still secure financing while providing protections for homeowners facing foreclosure on their primary residences.
POW: Purchase money, Owner-occupied, Within 2.5 acres
Remember that anti-deficiency protection in Arizona applies only to loans that meet all three POW criteria
For anti-deficiency questions, look for keywords indicating purchase money loans, owner-occupancy, and acreage limitations. Arizona's specific 2.5-acre requirement is a key distinguishing factor.
Real World Application
How this concept applies in actual real estate practice
A buyer purchases a home in Phoenix using a conventional loan as their primary residence. Three years later, they face job loss and can no longer make payments. The property goes into foreclosure. Without anti-deficiency protection, the lender could potentially pursue the borrower for the difference between the foreclosure sale price and the loan balance. However, because this was a purchase money loan on an owner-occupied property under 2.5 acres, Arizona's anti-deficiency protection limits the lender's recourse, preventing the borrower from facing additional financial liability beyond losing the property.
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