Posted By Fritzydoodle on 08/03/2008 5:33 PM That may or may not be true depending on the situation. Arizona's "anti-deficiency" statutes ARS 33-814.G and ARS 33-729.A prevent a lender from suing a person for any losses on a home after foreclosure if the property is located on 2.5 acres or less and is a single family residence or duplex. This only applies if the decrease in value is not due to the home owner's neglect. The amount 'forgiven' by the lender may also be taxable as income depending on circumstances.
Yes that is true, Arizona is a non-deficiency state, but an out-of-state lender may file suit in their state if they are not in a non-deficiency state and obtain a judgement for the difference between the amount owed and the amount the foreclosed property sells for. Most banks are doing so.
The amount foregiven normally is considered income for tax purposes, however, the mortgage foregiveness debt relief act of 2007 passed into law in Dec 2007 prevents it from being reported as income for a limited amount of time for debt reduced or eliminated in 2007, 2008, 2009 under certain conditions and the lender will report the amount on a 1099-C |