The budget package passed by the House includes the repeal of a bill that was originally intended to help lenders recoup losses from foreclosed homes.
The House’s action comes after Sen. Steve Pierce, the bill’s sponsor, endorsed the repeal of S1271. The bill makes homeowners who have been foreclosed on liable to lenders for the difference between the mortgage and sale price, and was meant to protect community banks from speculators who decide to cut their losses by allowing homes to lapse into foreclosure.
But Pierce and others worried that it would have the unintended consequences of removing traditional protections for people who lose their homes to foreclosure, and pushed for its repeal. That repeal was included as a BRB in the budget package passed by the House in the early hours of July 31.
Pierce said he will meet with stakeholders like the Arizona Association of Realtors and the Arizona Bankers Association about what changes should be made to the bill. He plans to resubmit the bill in the next legislative session, probably in a special session. When that session will be, he said, is anyone’s guess.
“That could be next week, next month. We know we’re going to be back before the first of October,” Pierce said.
House Majority Whip Rep. Andy Tobin said many in the Legislature still want to do something to help the banks.
“I think there’s a lot of us that still want to help the banks. We’re very nervous about the condition of some of the state’s banks. And I think Sen. Pierce and, I know, several members in the House body would like to have stakeholder conversations here again very quickly,” Tobin said.
The bill requires homeowners to show that they have lived in a foreclosed on house for at least six months in order to qualify for protections granted to homeowners who are in foreclosure. That provision led to concerns that it could impact others, such as people who have invested in second homes or bought houses for their children.