Can Arizona's Anti-Deficiency Statutes Apply to a Home Quity Line of Credit (HELOC)?

The goal in interpreting a statute is to find and give effect to the intent of the legislature. Mail Boxes, Etc., U.S.A. v. Indus. Comm'n, 181 Ariz. 119, 121, 888 P.2d 777, 779 (1995). In determining the legislative intent, the court must first look to the language of the statute. Canon Sch. Dist. No. 50 v. W.E.S. Constr. Co., 177 Ariz. 526, 529, 869 P.2d 500, 503 (1994). If the statutory language is unambiguous, the court must give effect to the language and not use other rules of statutory construction in its interpretation. Janson v. Christensen, 167 Ariz. 470, 471, 808 P.2d 1222, 1223 (1991).

A mortgage falls within the protection of A.R.S. §33-729(A) if it is " given ... to secure a loan to pay all or part of the purchase price, of a parcel of real property...." The plain language of the statute indicates that, to be a purchase money security interest, the loan would have to have been used to pay all or part of the purchase price of the property.

During the height of the recent Arizona real estate boom it was not uncommon for borrowers to finance the purchase of real estate with 80/20, 80/15, 80/10 loans. Thereafter, the borrowers would obtain home equity lines of credit (HELOC). The lender providing the line of credit would require the borrower to pay off the existing line of credit with a portion of the credit line. In that case, A.R.S. §33-729 is triggered and the lender providing the line of credit is precluded from pursuing a deficiency action against the borrower.

At Schern Richardson Finter Decker , a Phoenix area real estate law firm, we are happy to answer any questions about the Arizona anti-deficiency statute that you may have.