When Brandi Sveback and her husband, Chris, bought a house in Mesa six years ago, they had no idea how close the property would come to devastating their plans for the future. A couple with three small children, they just wanted a starter home. Eventually, they intended to save enough money to move to a nicer area with better schools.
Then came the housing bust. Unable to rent, sell, or make payments on their home, foreclosure was their only option. Now, thanks to an under-the-radar piece of legislation pushed by the banking industry and signed into law earlier this month by Governor Jan Brewer, the Svebacks will likely owe the bank close to $100,000.
And they're the lucky ones. Thousands of other homeowners will most certainly face bankruptcy as the result of a law passed at a time other governmental authorities are struggling to figure out ways to help homeowners.
Introduced by state Senator Steve Pierce, a Republican from Prescott, the measure will gut the current law, which can protect homeowners from bankruptcy when facing foreclosure. Three representatives of the banking industry testified in favor of the bill when it went before the Senate Finance Committee in June; no one testified against it. The amendment was tacked as a striker to an entirely unrelated bill dealing with the criminal justice system. Apparently no one on the side of the homeowner knew about the change until it was too late.
"I was shocked," says Brandi Sveback, who learned of it only after the governor signed the bill. "For them to make a law to basically wipe out people's lives . . . You go into a home with the intentions of living there — you look for the government to assist you. Now, suddenly we owe the bank tons of money."
Until two weeks ago, things were pretty good for Arizona homeowners. Arizona is one of 20 states with "anti-deficiency laws," designed to protect homeowners from bankruptcy if they face foreclosure.
It would take a law degree and 10 years in the business to understand exactly how the new law changes the way things work. It doesn't completely gut consumer protections, but it raises a lot of questions about just how much those protections have been limited.
Here's how the law has worked: If a homeowner faces foreclosure, the bank can take back only the home — it can't seize assets such as retirement funds and businesses, even if the value of the foreclosed property represents only a fraction of the original mortgage. This essentially protects homeowners already facing financial difficulty from devastation.
With two short sentences, the new law, which goes into effect September 30, nullifies this protection for thousands of Arizona homeowners, leaving them vulnerable to be sued — and possibly bankrupted — by banks for the total cost of their original mortgage.
"Businesses, retirement funds, [the banks] can liquidate you," says Phoenix real estate attorney Jim Eckley, who has nearly 150 clients who will be affected. "It's ugly. It usually pushes an otherwise solvent family into bankruptcy; stripped clean and wiped out by creditors. And in most cases these are not the so-called bad guys taking advantage of the banks — they're ordinary, responsible trustees."
In order to qualify for protection under the new law, homeowners must occupy their house for six consecutive months. They also must have a certificate of occupancy, which shows the city has inspected the new home upon its construction.
No big deal, right? One problem is that some cities — including Mesa — don't issue certificates of occupancy. And many older homes in Phoenix and Glendale weren't issued certificates when they were built. Under the new law, people without certificates and facing foreclosure can be sued by banks because they don't have a piece of paper they never needed — until now.
For many, obtaining a certificate of occupancy is likely to require a full inspection by the city. That could prove costly for people already in dire financial straits who must foot the bill for expensive repairs on a home they're only going to lose to the bank anyway.
Additionally, there are many homeowners — winter visitors, landlords, people with second homes — who don't live on their properties for six consecutive months.
Worse, the law appears to be retroactive. When the change goes into effect this fall, it won't just hit people who take out mortgages from that date forward — it could impact everyone, even if you took out the mortgage on your home 20 years ago.
At this point, it's know difficult to know how the law will be enforced. And frankly, it's a tough time in Phoenix to get any answers. The city's nearly emptied out. None of the three Democrats on the Senate Finance Committee were available for comment; also unreachable: Barbara Leff, the committee's vice chair, or the three representatives for the banking industry who testified in favor of the bill before the committee. Governor Brewer's office did not respond to repeated requests for comment.
However, it wasn't difficult to get a hold of real estate attorneys and real estate agents to discuss the potential ill effects of the law. In fact, last Friday, the Arizona Association of Realtors asked Brewer to adopt an emergency clause to change the new law during the ongoing special session.
*indicates required fields. Please enable browser cookies before filling out this form. All reader comments are subject to our Terms of Use. By clicking Add Comment, you acknowledge that you have reviewed and agree to these Terms.
Comments may take a few minutes to process and appear on the site. Please do not click the "Add Comment" button again while your comment is being added.
Durant'sPhoenix, AZ |
Dos GringosScottsdale, AZ |
Casey Moore's Oyster HouseTempe, AZ |
Arizona Biltmore Resort & SpaPhoenix, AZ |
Postino Wine CaféPhoenix, AZ |
TAYLOR SCOTT 08/03/2009 10:17:07 PM
Victims’ Rights Complaint GOVERNMENT OR LEGAL AGENCY(S) YOU ARE COMPLAINING AGAINST: State Senator Steve Pierce, Arizona Association of Realtors:Tom Farley Wendy Briggs:Banking Lobbyist Senate Finance Committee: Dean Martin, Chairman Jack Harper, Vice-chairman Robert "Bob" Burns Ken Cheuvront Jorge Luis Garcia Gabrielle Giffords Ron Gould Karen Johnson Jay Tibshraeny Barbara Leff, Vice Chair Representatives for the Banking Industry. ALL THOSE WHO SERVE LOBBYISTS. FILE AN INVESTIGATION FOR BRIBERY ALL TAX PAYING CITIZENS IN ARIZONA. PARTICULAR THOSE WHOM HAVE BEEN RIPPED OF BY THE MORTGAGE MELTDOWN CAUSED BY LOANS GIVEN TO THOSE WHOM COULD NOT AFFORD THEM IN THE FIRST PLACE BUT ALSO THOSE VICTIMS WHOM WERE FORCED INTO FORECLOSURE DUE TO LACK OF REGULATIONS AND LAWS. SOME PEOPLE WHO HAVE LOST JOBS DUE TO THIS CRISIS. THE MORTGAGE MELTDOWN STARTED THIS FINANCIAL CRISIS AND THE BANKS/MORTGAGE LENDERS/REALTORS/PROFESSIONAL REAL ESTATE INVESTORS WHO WERE ALLOWED TO PURCHASE MORE THAN ONE HOME WITH NO PROOF OF INCOME AND WALK AWAY WITHOUT CONSEQUENCES. LET ME MAKE IT SIMPLE, IF YOU DO NOT QUALIFY FOR A $300,000.00 AND YET WERE GIVEN ONE BY THE FORE MENTIONED ABOVE KNOWING THEY WERE GOING TO FAIL AND GO INTO FORECLOSURE. WHAT DO YOU CALL THAT? IT IS INTENTIONAL FRAUD! THIS WHOLE MORTGAGE MELTDOWN WAS A SCAM FROM THE BEGINNING. A MODERN DAY PYRAMID SCHEME RIGHT BEFORE WALLSTREET"S EYES AND THEY ARE JUST AS GUILTY IF NOT RESPONSIBLE. THESE ARE EDUCATED PEOPLE, THEY WATCHED IT GOING ON AND LET IT HAPPEN BECAUSE THEY MADE MONEY. THE ONLY THING THE FOR MENTIONED ABOVE THIEVES DIDN'T COUNT ON WAS SO MANY WOULD FORECLOSE AT OUNCE AND CAUSE THE FORECLOSURE'S IN A MASSIVE WAVE. THE NEXT WAVE IS GOING ON NOW BUT WHAT IS TO COME IS THE BIGGEST WAVE OF ALL. 2011 WILL TAKE US BACK TO THE BEGINNING BUT WILL BE WORSE. WHY? BECAUSE MOST OF THESE LOANS WERE MADE IN 2006 WITH A FIVE YEAR FIX. THESE BANKS AND LENDERS AND MORTGAGE SERVICES (AURORA LOAN SERVICERS ALL KNOW THIS AND THEY ARE RACING TO SAVE THEMSELVES. THESE SENATORS HAD TO GET SOMETHING IN RETURN FOR ACCEPTING TO PASS SUCH A HORRIBLE IRRESPONSIBLE BILL SUCH AS THE (Senate Bill 1271) HOW STUPID ARE THES PEOPLE WHO ARE LEADING THIS COUNTRY??? I EXPECT HANDCUFFS ON THE SENATOR AND HIS RESIGNATION IMMEDIATELY AND A FULL INVESTIGATION INTO HOW AND WHY A LAW WOULD PASS SO EASILY BY MANY SO CALLED EDUCATED MEN AND WOMEN. IT CAN ONLY BE BRIBERY! Bribery is a crime implying a sum or gift given that alters the behavior of the person in ways not consistent with the duties of that person. It is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or other person in discharge of a public or legal duty. The bribe is the gift bestowed to influence the receiver's conduct. It may be any money, good, right in action, property, preferment, privilege, emolument, object of value, advantage, or any promise or undertaking to induce or influence the action, vote, or influence of a person in an official or public capacity. It is a form of political corruption and is generally considered unethical. In most jurisdictions it is illegal, or at least cause for sanctions from one's employer or professional organization. Bribery around the world is estimated at about $1 trillion (£494bn) and the burden of corruption falls disproportionately on the bottom billion people living in extreme poverty.[1] For example, a motorist may bribe a police officer not to issue a ticket for speeding, a citizen seeking paperwork or utility line connections may bribe a functionary for faster service, a construction company may bribe a civil servant to award a contract, or a narcotics smuggler may bribe a judge to lessen criminal penalties. In some cases, the briber holds a powerful role and controls the transaction; in other cases, a bribe may be effectively extracted from the person paying it. Expectations of when a monetary transaction is appropriate can also differ: tipping, for example, is considered bribery in some societies, while in others the two concepts may be interchangeable. In Spanish, bribes are referred to as "la mordida" (literally, "the bite"), in middle eastern countries they are Backshish or Bakshish. The offence may be divided into two great classes—the one where a person invested with power is induced by payment to use it unjustly; the other, where power is obtained by purchasing the suffrages of those who can impart it. Bribery may also take the form of a secret commission, a profit made by an agent, in the course of his employment, without the knowledge of his principal. The level of non-monetary favours that constitute an incentive to unethical behaviour is variable and may constitute a matter of opinion in a given field: