SB 1271

(See Most Current Updates Below)

Updated: July 27, 2009

Tom Farley (CEO for the Arizona Association of REALTORS) has been keeping AAR members updated via email as to what is going on with the anti-deficiency bill SB 1271.  If you have missed or didn’t receive said emails, you can find updates on the AAR’s legislation issues website, RalliNOW.

Here’s a quick rundown of what’s been going on and where you can find more SB 1271 information:

On July 16th, the RalliNOW website posted this article explaining the changes between the current law and the new law that is currently set to take effect on September 30, 2009.  The post states:

The current law prohibits a lender from seeking a deficiency judgment against the trustor (foreclosed property owner) if the trust property is 2.5 acres or less and is used as a single one-family or single two-family dwelling.

(…)

After September 29th, SB 1271 will prohibit a deficiency judgment against a trustor pursuant to a trustee’s sale of a trust property that is 2.5 acres or less and is used as a single one-family or single two-family dwelling if both of the following apply:

o   The trustor has lived in the trust property for at least six consecutive months.
o   A certificate of occupancy has been issued for the property.

Four days later, the AAR posted another article on RalliNOW saying they are trying to get this issue revisited by Governor Brewer this week.  They wrote:

Our goals are to narrow the bill’s impact, clarify the statute’s intent and to include an emergency clause in the legislation so that the AAR’s amendments would take effect and overwrite the amendments that SB 1271 made to the Anti-Deficiency statute before it goes into effect on September 30, 2009.

Then last Friday (July 24th) the NY Times spoke up with an article that better explains some of the downsides of the new law.

…the state Realtors group said the legislation goes further than targeting ”spec builders.” For example, the changes would roll back protections for foreclosures involving second homes and homes which owners who let relatives live in them, the group said.

The result could more people filing for bankruptcy protection to shed their debts if banks won’t work with them to avoid foreclosures, said Tom Farley, head of the Realtors group.

That spells trouble for a housing industry that is trying to recover in a market burdened by already high foreclosure rates, Farley said. ”It doesn’t bode well for our economic recovery.”

It doesn’t look like we’ve heard the end of this story.  Stay tuned for more news and/or further clarification as to what effects this law will have.

Update as of July 30th:

It looks like Senator Pierce is on our side.  The post from July 29th on the AAR’s website RalliNOW says:

Sen. Steve Pierce, sponsor of SB 1271, feels the bill needs to be fixed due to the unforeseen and unintended consequences of the legislation. He has asked the Legislature and the Governor’s office to repeal the bill so that legislators and industry stakeholder groups can work on a new bill to accomplish the original objective of 1271- to help small community banks in Arizona.

Catherine Reagor has also chimed in with an article on her blog, mentioning banks are holding off on foreclosures until after 9/30 since they might be able to recoup some of their losses.  The current plan of action to fix SB 1271 is to include a recall on the state budget legislation.

SB 1271 update as of August 6th:

Straight from the Arizona Association of REALTORS® CEO Tom Farley’s email to AZ REALTORS®…

The state’s original anti-deficiency language has been inserted into two budget bills (HB 2008 and SB 1024) currently being debated by the legislature which would have the effect on nullifying the passage of SB 1271. HB 2008 has quickly passed the Arizona House of Representatives. SB 1024 is awaiting final vote which could happen August 8th or on the 10th. If for some reason, the Senate Bill fails on final vote, we will immediately focus on our next effort to repeal the law. The banking lobby and at least one member of the legislature are pushing for an amendment to SB 1271, instead of repeal, that would allow it to still apply retroactively to loans already in existence. We have been advised that this action would ultimately be unconstitutional if not unjust.

SB 1271 update as of August 18th:

We just got an issue of the Capitol Insider from the AZ Association of REALTORS.  It included an update on SB-1271, which can be found on the RalliNow website.

The email indicated that the SB 1271 repeal language is heading to the Governor’s office on a budget bill that doesn’t address a sales tax increase.  It’s rumored that Governor Brewer isn’t going to sign a budget that doesn’t address an increase in sales tax, either directly or by vote.

August 25th Update:

Catherine Reagor writes on her blog:

Legislation that would repeal the most debated parts of a new Arizona foreclosure law is sitting on Arizona Gov. Jan Brewer’s desk. She has until close of business Wednesday (Aug. 26th) to act on it.

This process is crazy.  Watching sb1271 play out over the last month has been super educational.  It’s been a play by play in how laws are repealed in Arizona.  It’s so interesting to see all the different angles the lobbyist have to pursue in order to work the system.

August 25th Update (II):

Straight from the Capital Insider email that Jim Sexton received this afternoon:

The Arizona Senate and House of Representatives moved to sine die the 49th Legislature- 3rd Special Session on Tuesday at approximately 1:45pm. This gives Governor Jan Brewer an additional ten days to act on the budget bills sent to her last Thursday. She is to resume talks with Democrats at 3:30pm this afternoon. They are asking for changes in education, DES, DHS and AHCCCS in exchange for their support of the three-year 1-cent sales tax referral. Majority Leadership has said that the Democrat’s price tag is just too high and will not receive bipartisan support at this time. HB 2008, which includes the repeal of SB 1271, is among the budget bills that are still awaiting the governor’s action. It is believed that she will take the full 10 days before acting on any measure, in order to continue to work towards the sales tax referral. We continue to encourage her signature on HB 2008.

Just when I thought this controversy was going to be over today, they pull the Sine Die card!!  It sounds like the next update will come across around Sept. 4th.

SB 1271 Final Update:
(September 4th, 2009)

SB 1271 Repealed