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August, 2010

Saguaro fruit used by desert birds and animals, as well as humans, for the pulp, seeds and juice that can be made into jam and wine, among other things.

Cactus - June
Loan Protection for   Arizona Homeowners 

Potential Personal Liability Exposure ?
Client Spotlight
TreyTrey Chappell founded College X-ing, LLC in 2002 as an independent college advising service.  As high school enrollments swelled and the demands of counselors on campus increased, the Company found a demand it could serve.  Over the past eight to nine years, College X-ing has assisted over 300 local families, working with students and parents to find a list of colleges to apply to, strategizing the students' academics, and helping applicants to organize their college applications.  Today the Company still offers that same great local assistance, but has reached out of state as well, advising families via Skype, because they too have a need for personalized college advising. 
In addition to that service, College X-ing works with college students on an assessment to match their strengths to a college major (the Company found a counseling void in the colleges as well), and it also works with 8th graders to help prepare for the Catholic High School entrance exam.
As a finance major, Trey imagined himself somewhere on Wall Street, but today finds his interests on such streets as University Boulevard and College Avenue.
(For further information, please contact Trey Chappell at
Trey Chappell
Attorney Spotlight

attyMargrave Celmins, P.C. is pleased to announce that attorney Rick DePonte has been elected to serve as President of the Rotary Club of Ahwatukee Foothills in Phoenix.  Rick has been with the club for five years and has previously served as club secretary and is currently on the Board of Directors.  Rick's term as President commenced on July 1, 2010.


Rotary is an international service organization with 33,000 clubs and 1,200,000 members worldwide. A few of Rotary's numerous goals are to eradicate polio, improve health, assist those suffering in poverty and to promote world peace.

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This  newsletter is for informational purposes only.  Legal advice is provided only through a formal attorney/client relationship.
Margrave Celmins, P.C.
8171 E. Indian Bend Rd., #101
Scottsdale, Arizona 85250
WelcomeWelcome to the third issue of The Conference Room.  This month we feature an article on a subject that has impacted, directly or indirectly, just about everyone in our state in some fashion.  What are the consequences when someone's house is "under water?"  Also, for those of you with children or grandchildren approaching college age, you will want to read the article on our client Trey Chappell and his company College X-ing, LLC, a great resource for helping families make sound decisions on the choice of university. 
Breaking News: Our firm just won a major appeal at the U. S. Fourth Circuit Court of Appeals.  Details will be posted to our website later this week. 
As always, if you see something a friend or business associate might find useful, please feel free to forward this newsletter to them.  And if you have any thoughts to share, please contact our editor Patty Copeland at
Michael Margrave
Margrave Celmins, P.C.

articleWe all know of a friend, relative or neighbor who as a result of the economy or personal circumstances is not able to make the house payments or whose house is worth substantially less than the amount owed on the home loan.


firstArizona Law Protects Homeowners


Arizona and a small minority of other states have adopted laws that protect homeowners to a varying degree from personal liability after losing a home to foreclosure.  Arizona's anti-deficiency law found in Arizona Statute 33-814(G)1 is best illustrated by an example:


1. Original purchase price of home


2. Down payment: 10% 


3. Amount borrowed and current balance owned                                         


4. Current value of the house and the amount at which the house was sold at foreclosure



5. Amount outstanding and due and owing to the bank on the money borrowed("Deficiency")                                      


The bank wants all of the money back it loaned to the homeowner and is $30,000 short when the property was sold at a foreclosure sale.  This is termed a Deficiency.


Arizona law protects the homeowner from the bank's claim for Deficiency if (1) the residence consists of a property on 2.5 acres or less, (2) the property is restricted to and used as a single-family or dual-family dwelling, and (3) the money borrowed from the bank was used to purchase the home.1   Under these circumstances, the bank cannot pursue the homeowner for the $30,000 Deficiency even if the value of the house as sold at the foreclosure sale is less than the amount owed.


In common language, most individuals refer to the home loan as a mortgage.  Arizona has adopted a deed of trust statute2, and deeds of trust in Arizona generally have replaced the use of mortgages. 


Deeds of trust are popular for lenders because the foreclosure (1) takes place without court action and (2) can be quickly accomplished, generally about 90 days after the Notice of the Trustee Sale.


In order to initiate a trustee sale, the bank must (1) record the Notice of Trustee's Sale at least 91 days before the date of sale; (2) mail a copy of the notice to the homeowner within five (5) days after the Notice of Trustee's Sale is recorded; (3) mail a copy of notice to all other parties having a recorded interest in the property; (4) post a copy of the notice on the property in a conspicuous place at least 20 days prior to the sale; and (5) publish the notice in a newspaper in a county where the property is located at least once a week for four consecutive weeks until at least ten days before the sale is held. 


In certain instances, prior to recording the deed of trust, the lender must attempt to contact the homeowner to explore options that avoid foreclosure.  This recent provision, however, does not apply to loans purchased or serviced by federal, state or local housing agencies such as the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation or mortgages that were collateralized as securities.3


The Arizona Supreme Court in the famous Baker vs. Gardner case4 held that any lender holding a deed of trust on a residence may not waive the purchase money security and sue to collect a Deficiency (as in our $30,000 example).  The objective in enacting A.R.S. 33-814(G) was to "abolish the personal liability of those who give deeds of trust encumbering properties of 2.5 acres or less and used for single-family or two-family dwellings."  This anti-Deficiency protection is applicable to investor-owned residential properties.5  So, too, the anti-Deficiency protection is available in the event the homeowner renews or refinances the residence.6


secondSecond Deeds of  Trust and Home Equity Loans


Complications arise in connection with subordinate deeds of trust and home equity loans.  The homeowner cannot be sued by the lien holder if the second loan was also a part of the purchase money transaction.  If, however, the second loan is used to purchase a car or boat or for personal expenses, etc., the homeowner generally will be sued for the Deficiency.  In the case of second mortgages and deeds of trust, homeowners should consult an attorney to ascertain their rights. 


thirdOther Liabilities of Homeowners


If a homeowner has damaged the property or physically abused or destroyed it, the homeowner can be sued by the lender for damages.7  Therefore, it is important to maintain insurance coverage until the trustee sale is completed.


Homeowner Association ("HOA") fees generally are the personal liability of the homeowner, and initiation of a foreclosure proceeding on the property does not eliminate that obligation.  The homeowner often will be sued for such delinquent fees.  Therefore, HOA fees must be paid until the trustee sale is completed.


fourthHomeowner Options


If the homeowner is exposed to a potential Deficiency, various options could and should be considered, including (1) a short sale of the property with consent and waiver of claims by all lien holders; (2) deed in lieu of foreclosure, i.e. giving the property back to the lender in consideration of the lender waiving all claims; (3) loan modification efforts with the lender; and (4) in extreme cases, filing personal bankruptcy.


Each and every one of the above initiatives has long-term consequences on the homeowner's lifestyle: ability to purchase items on credit, self-esteem and quality of life will all be affected.  Any homeowner faced with a bank claiming a Deficiency should see an attorney unless the fact pattern falls squarely within the anti-Deficiency protections under Arizona law.  A full array of rights, duties, responsibilities and practical strategies should be explored.


(1)      Arizona Revised Statutes Annotated 33-814(G)

(2)      Arizona Revised Statutes Annotated 33-801 et seq

(3)      Arizona House Bill No. 2626, enacted 2010

(4)      Baker vs. Gardner 160 Ariz. 98, 770 P.2d 766 (1988)

(5)      Northern Arizona Properties vs. Pinetop Properties Group 151 Ariz. 9, 725 P.2d 501 (App. 1986). 

(6)      Bank One Arizona, N.A. vs Beauvais 188 Ariz. 245, 934 P.2d 809 (1997).

(7)      Arizona Revised Statutes Annotated 33-806(B)


 Lat J. Celmins ( practices in the areas of Real Estate law, consultation on complex commercial ligitation, and corporate, transportation and general commercial law.

About Our Law Firm
Margrave Celmins is a member of LawPact, which is an association of independent, business-oriented law firms in the U.S. and overseas.  Currently there are 49 member firms.  This is a terrific resource for clients who have legal matters in other states and abroad.  There are 25 states and 15 countries
represented by member firms throughout
Europe and in Canada, Mexico, Brazil,
Argentina and India.
Margrave Celmins, P.C.
8171 E. Indian Bend Rd., #101
Scottsdale, Arizona 85250
Margrave Celmins, P.C.