State lawmakers will have to start over again in January if they want to tighten up foreclosure laws.
As expected, Gov. Jan Brewer has signed legislation repealing a change in law originally approved earlier this year to make it harder for some who owe more on their homes than they are worth to walk away without having to pay the balance.
Arizona has had a “non-recourse” law for years. It says those who have mortgages on single-family houses can default on their loans without fear of being pursued by lenders, even if they owe more than their homes are worth.
Tanya Wheeless, president of the Arizona Bankers Association, said the law, designed to protect those who live in their homes, was being used unfairly by real estate speculators. The change protected those in owner-occupied homes but stripped the protection for loans made when the owner lives elsewhere.
But the law came under immediate criticism from the Arizona Association of Realtors. They said it affected not only speculators but also individuals who own a second home and those who buy homes for family members.
An effort to craft a last-minute deal during the just completed special session came too late for lawmakers to consider. So they decided simply to repeal the change they made earlier this year, restoring the non-recourse law to the way it was in January.
A new effort to tighten up the law is expected when the Legislature reconvenes in January. Wheeless said lenders are willing to protect individual homeowners, including for second homes, as long as they can pursue those who borrow money to build homes solely for the purpose of reselling them.