Are FHA loans covered by state anti-deficiency laws?

UPDATED: Aug 2, 2011

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Are FHA loans covered by state anti-deficiency laws?

If so, would a FHA mortgage on an AZ home that stated the lender has recourse trump the state law? I let the ex-wife take the house in divorce. I only was able to live there 7 months. Joint mortgage. If she forecloses, I just don’t want to get sued for the deficiency.

Asked on August 2, 2011 Arizona


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

State laws on re-course or non-recourse loans apply to all loans generated and closed in the individual state regardless of the loan is FHA insured or not.

Most states' laws on anti-deficiency issues pertain to a "purchase money loan" for a home that a person intends to live in, not an investment property to be rented out to third parties. Some states make a disctinction between judicial foreclosures and non-judicial foreclosures. In most states, even if a loan is not purchase money, if the lender forecloses upon it in a non-judicial foreclosure, there is no recourse for any shortfall to the borrower if the lender does not get paid in full.

If the loan presently existing on your former home was "purchase money" and your wife gets foreclosed upon it, there should be no recourse to you if you signed the trust deed.

Good question.

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