HB2634 - 511R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 33-807, Arizona Revised Statutes, is amended to read:

START_STATUTE33-807. Sale of trust property; power of trustee; foreclosure of trust deed

A. By virtue of his position, a power of sale is conferred upon on the trustee of a trust deed under which the trust property may be sold, in the manner provided in this chapter, after a breach or default in performance of the contract or contracts, for which the trust property is conveyed as security, or a breach or default of the trust deed. At the option of the beneficiary, a trust deed may be foreclosed in the manner provided by law for the foreclosure of mortgages on real property in which event chapter 6 of this title governs the proceedings. The beneficiary or trustee shall constitute the proper and complete party plaintiff in any action to foreclose a deed of trust. The trustee may exercise the power of sale may be exercised by the trustee without express provision therefor in the trust deed.

B. The trustee or beneficiary may file and maintain an action to foreclose a deed of trust at any time before the trust property has been sold under the power of sale. A sale of trust property under the power of sale shall not be held after an action to foreclose the deed of trust has been filed unless the foreclosure action has been dismissed.

C. The trustee or beneficiary may file an action for the appointment of a receiver according to sections 12‑1241 and 33‑702. The right to appointment of a receiver shall be independent of and may precede the exercise of any other right or remedy.

D. Except for a first lien against owner-occupied residential property, the power of sale of trust property conferred upon on the trustee shall not be exercised before the ninety‑first day after the date of the recording of the notice of the sale. The sale shall not be set for a Saturday or legal holiday. The trustee may schedule more than one sale for the same date, time and place.

E. For a first lien against owner-occupied residential property, the power of sale of trust property conferred on the trustee shall not be exercised before compliance with the foreclosure prevention program established by sections 33-807.02, 33-807.03, 33-807.04 and 33-807.05.

E. F. The trustee need only be joined as a party in legal actions pertaining to a breach of the trustee's obligation under this chapter or under the deed of trust. Any order of the court entered against the beneficiary is binding upon on the trustee with respect to any actions that the trustee is authorized to take by the trust deed or by this chapter. If the trustee is joined as a party in any other action, the trustee is entitled to be immediately dismissed and to recover costs and reasonable attorney fees from the person joining the trustee. END_STATUTE

Sec. 2. Title 33, chapter 6.1, article 1, Arizona Revised Statutes, is amended by adding sections 33-807.02, 33-807.03, 33-807.04 and 33-807.05, to read:

START_STATUTE33-807.02. Foreclosure prevention program; applicability; definition

A. For a first lien on an owner-occupied residence, on occurrence of a default in payment on a deed of trust, this section and sections 33-807.03, 33-807.04 and 33-807.05 apply and the beneficiary shall provide the trustor with a notice of default that includes the following:

1. A statement of the beneficiary's right to foreclose.

2. A statement that the beneficiary has possession of the deed of trust, the promissory note and any assignments, endorsements or other documents establishing full documentation of the right of the beneficiary to foreclose on the property.

3. Notice that the trustor may request and shall receive the trustor's payment history dating back to the trustor being sixty days delinquent in payments, copies of the deed of trust, a promissory note and any assignments and endorsements sufficient to evidence the beneficiary's right to foreclose, and the name of the investor in the deed of trust.

4. A statement of possible eligibility for protection under the federal servicemembers civil relief act.

5. A description of any loss mitigation efforts that have been undertaken by the beneficiary regarding the deed of trust, and if none, a statement as to why.

6. A statement that the borrower may be eligible for a loan modification.

7. A brief description of available forms of foreclosure prevention, including loan modifications, forbearance, repayment plan, short sale and deed in lieu of foreclosure and whether a written application for loan modification or other method of foreclosure prevention assistance is required.

8. A statement on how to apply for a loan modification or other foreclosure prevention assistance from the beneficiary, and notice of when any application for assistance is due.

B. If the trustor submits a complete application for foreclosure prevention assistance within one hundred twenty days after receiving notice of default from the beneficiary, the beneficiary shall do the following:

1. Acknowledge receipt of the trustor's application within three business days after receipt.

2. Inform the trustor in writing of the process used in evaluating a request for loan modification or other foreclosure prevention assistance, and inform the trustor regarding the expiration dates for submitted documents.

3. Notify the trustor of any deficiencies in the submitted documents within five business days after receipt.

4. Consider the trustor's application and determine whether a loan modification or other assistance is appropriate.

C. For the purposes of this section and sections 33-807.03, 33-807.04 and 33-807.05, "beneficiary" includes a servicing agent or any other agent with authority to act on the deed of trust or promissory note on behalf of the beneficiary. For any actions taken by or duties imposed on a beneficiary pursuant to these sections, a servicing agent or any other agent acting on behalf of the beneficiary is subject to compliance with these sections and the beneficiary is legally responsible for the actions of any agent. Any enforcement action available as a result of the actions of a servicing agent or other agent is fully enforceable against the beneficiary.END_STATUTE

START_STATUTE33-807.03. Single point of contact; no foreclosure action

A. On compliance with section 33-807.02 and receipt of a trustor's application for loan modification or other foreclosure prevention assistance, the beneficiary shall establish a single point of contact for the trustor regarding the trustor's application process. The beneficiary shall identify the single point of contact and provide contact information to the trustor within ten business days after receipt of the application, and shall provide the trustor with any revisions in the point of contact information within five business days after the change.

B. The beneficiary shall ensure that the single point of contact for the trustor shall have access to all information necessary to inform the trustor on an ongoing basis as to the status of the trustor's application and shall provide that information in a timely, accurate and adequate manner. The single point of contact may be a single person or may be a clearly identified group of persons.

C. The beneficiary shall also ensure that the single point of contact has appropriate personnel and other resources reasonably needed to comply with the beneficiary's duties.

D. While the trustor's application for loan modification or other foreclosure prevention assistance is pending with the beneficiary, the beneficiary shall not assess or collect any late fees or other penalties from the trustor and shall not record a notice of trustee's sale or take any other action to foreclose on the property or to enforce collection of the amounts owed. END_STATUTE

START_STATUTE33-807.04. Loan modification programs; appeal

A. Within ten days after providing a notice of default to a trustor, the beneficiary shall provide notice to the trustor of any federally authorized loan modification programs, any loan modification programs established by the beneficiary and any loan modification programs the beneficiary is otherwise legally obligated to establish and offer to borrowers.

B. If the beneficiary denies the trustor's application for a loan modification, the beneficiary shall provide the trustor written notice of the denial, and shall state the reasons for the denial and the facts considered to reach the decision. The notice shall also advise the trustor of the time allowed for an appeal of a denial and any other options available to the beneficiary.

C. A trustor may appeal the beneficiary's denial of the loan modification within thirty days after receipt of the denial. The beneficiary shall provide for an appeal process for denials of loan modifications.

D. If the beneficiary accepts the trustor's application for a loan modification or other assistance, the beneficiary and the trustor shall execute a written agreement evidencing the modification or other assistance.

E. A beneficiary may lawfully exercise the power of sale for a first lien against an owner-occupied residence after compliance with sections 33‑807.02 and 33-807.03 and this section if any of the following occurs:

1. The beneficiary has offered a loan modification or other foreclosure prevention assistance and the trustor has declined to accept the offer. The beneficiary may record a notice of trustee's sale no earlier than fifteen days after the trustor's refusal.

2. The trustor is notified that the trustor is not eligible or has been denied a loan modification or other foreclosure prevention assistance. The beneficiary may record a notice of trustee's sale no earlier than thirty days after the trustor received notice. If the trustor appeals the denial, the beneficiary may record a notice of trustee's sale no earlier than the later of the fifteen days after denial of the appeal or fifteen days after the trustor declines an offer made to the trustor after the appeal.

3. The trustor is in default on payments under an executed loan modification agreement. The beneficiary may record a notice of trustee's sale as otherwise provided by law. END_STATUTE

START_STATUTE33-807.05. Enforcement; injunction; damages; attorney general

For any violation of sections 33-807.02, 33-807.03 and 33-807.04, the following apply:

1. A trustee may file an action against any beneficiary who commits a material violation and may obtain injunctive relief if a trustee's deed has not been recorded on the property. If a trustee's deed has been recorded, the trustor may file an action for damages and if the beneficiary's action was intentional, may be awarded the greater of treble damages or fifty thousand dollars.

2. The attorney general may file an action under title 44, chapter 10, article 7, request that a grand jury be convened to consider the violations or take any other enforcement actions authorized by law. END_STATUTE

Sec. 3. Section 33-1331, Arizona Revised Statutes, is amended to read:

START_STATUTE33-1331. Notice of foreclosure; effect on lease; damages

A. If a rental agreement is entered into after the foreclosure action was initiated, the owner shall include written notice of possible foreclosure with the rental agreement with the tenant. If the foreclosure was initiated after execution of a rental agreement, the landlord shall provide the tenant with notice of the foreclosure in the same manner as other notices under the lease. The notice shall include a statement that is substantially in the following form:

This property is undergoing foreclosure. For more information on this action, you should contact ________________ (name, address and phone number of the court where the action is filed or trustee, attorney or other responsible party).

A sale at auction may or may not occur as a result of this foreclosure. Currently, the sale of this property has been set for _________ (time, date and place) or no date for sale of this property has been established.

On completion of any foreclosure sale, the new landlord is required to offer you either a new rental agreement or provide you with notice that your lease will terminate in ninety days.

B. If the owner fails to provide notice as prescribed in this section the tenant may deliver a written notice pursuant to section 33-1361 and recover damages and obtain injunctive relief. The security deposit shall be returned to the tenant as prescribed in section 33-1321.

C. A landlord who acquires title to the leased property after a foreclosure shall provide any existing tenants with a new rental agreement or shall provide the tenant with ninety days' notice of termination of the tenant's rental agreement.

C. D. This section shall not apply to multifamily residential rental units consisting of four or more connected units. END_STATUTE