During the real estate thrive of the mid 2000's there was massive appreciation in the value of homes in Arizona. Many borrowers refinanced the loans used to purchase their homes, and took "cash out" at the time of replacing. For example, a homeowner purchased the home in 2003 with a loan of $100, 000, refinanced the home in 2005 with a new $250, 000 loan, and took "cash out" of $150, 000. The homeowner then used this $150, 000 "cash out" to buy stocks and bonds, to purchase a recreational vehicle, or even to go to Nevada. The question is and has been for many years: Can the financial institution collect this $150, 000 "cash out" from the homeowner?
On 03 20, 2012, the Arizona Court of Appeals basically answered "yes" to this question. See Helvetica Providing, Inc. v. Pasquan, 1CA-CV 10-0418 (decided 03 20, 2012). This Helvetica decision involved a lender's claim for a lack following a judicial court-ordered foreclosure of a loan. Note: More than 99% of foreclosures in Arizona are non-judicial, i. e., trustee's sales. Unlike judicial court-ordered foreclosures which do allow a lack claim after foreclosure of a loan not used to pick the home, there can never be a lack after foreclosure by a trustee's sale of any loan secured by a home.
In this Helvetica decision the Arizona Court of Appeals decided that the lender could pursue a lack action for the "cash out" replacing following a judicial court-ordered foreclosure. The Arizona Court of Appeals reasoned that sound public policy should not allow a borrower to protect the "cash out" when replacing the original loan.
In other words, in the example above 리니지 현금화, if the borrower did not refinance the original $100, 000 loan, but took out a $150, 000 home fairness loan ("HELOC"), the financial institution could bring a set action contrary to the borrower for this $150, 000 HELOC. The Arizona Court of Appeals reasoned that there should be no legal distinction between the borrower's liability for this $150, 000 whether a "cash out" replacing or a HELOC. Therefore, unless this Helvetica decision is overruled by the Arizona Better Court, the financial institution should be able to prosecute the borrower in a collection action for the $150, 000 "cash out" replacing similar to the lender's capacity to prosecute the borrower in a collection action for a $150, 000 HELOC.
The "bottom line" is that lenders formerly occasionally filed collection actions against borrowers for the amount of the "cash out" replacing, but in light of this Helvetica decision there should be many more collection actions by lenders against borrowers for "cash out" taken when replacing.
Finally, the Helvetica decision also decided that, one, a construction loan used to build a home is generally protected as a purchase money loan, and, two, that a replacing of the original loan with a different lender is also protected.