by Edmund F. Richardson
New obligations imposed upon trustees and beneficiaries on trustee’s sales may lessen the effect on values of real property in neighborhoods where the foreclosures take place.
House Bill 2033, recently enacted by the Arizona State Legislature, signed by the governor and filed by the Secretary of State, imposes a new obligation upon the trustee and a new duty upon the beneficiary of a deed of trust who receives private mortgage insurance funds in connection with a foreclosure.
Trustee sales are the preferred method of foreclosing loans secured by real property in Arizona. The procedure for conducting trustee sales is dictated by the statutory framework set up by the legislature. This new legislation imposes additional responsibilities upon the creditor, known as the beneficiary under the deed of trust statute, and the trustee whose primary responsibility is to conduct the trustee sale which has the effect of depriving the original owner of title to the property based upon the owner’s failure to pay the debt secured by the deed of trust.
Enacted as chapter 50, 2013 Arizona Session Laws, the revisions to the statutes require a beneficiary of a foreclosed deed of trust who receives payment based on private mortgage insurance covering the sale in addition to the proceeds of the sale is required to submit a form approved by the Department of revenue to the County recorder within four months after the date of the trustee sale. The form will be a declaration of additional funds received and must include 1) the County assessor’s parcel number or numbers, 2) the name and address of the beneficiary, 3) the date of the trustee sale, 4) the highest bid received by the trustee at the sale 5) the recording number of the trustee’s deed and 6) the amount of any additional compensation received by the event beneficiary within six months after the date of the trustee sale.
House Bill 2033 also requires the trustee, upon request from the purchaser to provide an unrecorded copy of the signed trustee’s deed to the purchaser.
Finally, the bill requires the trustee to notify the beneficiary, on or before the date of the trustee sale, of the beneficiary’s obligations as prescribed by section 11-1133 to provide a declaration of additional funds received.
During the recent real estate crisis, many property owners have been concerned about the effect upon the value of their own property of foreclosures of other properties within their vicinity. One effect of House Bill 2033 may be to lessen the negative effect of foreclosures by requiring lenders to report to the department of revenue amounts received in addition to the proceeds of the trustee sale. Many loans secured by residential real property are covered by private mortgage insurance. When a borrower defaults on a loan that is insured by private mortgage insurance, and the lender forecloses, the lender sometimes receives an additional payment from the mortgage insurer that now will be included in the purchase price reported to the Department of Revenue. While appraisers do not give a whole lot of weight to the values established by County Assessor’s in connection with real property taxes, having a record of the additional payments received in connection with the foreclosure by the lender may justify establishing higher values for other properties in the neighborhood.
House Bill 2033 becomes effective 90 days after the June 14, 2013, adjournment of the legislature or September 13, 2013.