Sen. Wants Repeal of Anti-Deficiency Law

If you go into foreclosure, you expect to lose your home. But with a new bill, you could lose a lot more than that. And now, the Senator who wrote the bill is admitting it has some major flaws.

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The new anti-deficiency law is supposed to discourage investors from foreclosing and protect community banks -- instead it punishes anyone with a vacation home or a second home that falls on tough times.

Foreclosing on a home is hard enough, but now a new Arizona law could let the bank sue families for the money they owe on a foreclosure.

"Unfortunately it really got pushed through the House and the Senate before there was a real thought given to the ramification of this bill," says attorney Neil W. Thomson.

State lawmakers are now scrambling to repeal the law they just passed. If not, homeowners with second homes, vacation homes, or just homes occupied by relatives could be taken to court by the bank.

"They could possibly garnish wages, seize assets, take other measures to collect upon that judgment directly against that homeowner."

This could happen to anyone who doesn't have a certificate of occupancy and can't prove they've lived in a house for six consecutive months.

"This amendment now will affect families or homeowners who were in the stage of building their home when the market crash hit."

The bill was only intended to target investors who bought up lots of properties and are now walking out on their loans, leaving smaller banks with big losses. Senator Steve Pierce first sponsored the bill, and now admits it needs to be fixed before the law goes into effect.

The law is supposed to take effect at the end of September.