Pub. 5 2015 Issue 1

n Anti-Deficiency Reform — continued on page 14 thereby obtain anti-deficiency protection. 35 Thus, lenders could not accurately determine at the origination of a con- struction loan whether they would have the right to pursue a money judgment in the event of a default. At a time when the housing market was just beginning to show signs of recovery, Mueller posed the risk of chilling new home construction. The stage was set for a compromise that would result in the first reform of Arizona’s anti-deficiency statutes since the failed effort of 2009. P AX ARIZONA H.B. 2018 was introduced in the Arizona legislature after months of negotiation between the Arizona Bankers Associa- tion and the Arizona Association of Realtors. The bill achieves the bankers’ association’s objectives of: (1) eliminating anti-deficiency protection for many business loans; and (2) abrogating Mueller’s expansion of the “utilized as a dwelling” requirement to unfinished homes that are intended to be utilized as a dwelling, but that have never actu- ally been put to such use. H.B. 2018 also meets the concerns of realtors and home- builders by leaving intact protection for the vast majority of residential mortgagors – including those who own second homes and who buy homes for their relatives (such as chil- dren attending college). Indeed, because the amendments target only those “engaged in the business of constructing and selling dwellings,” many people who purchase substantially completed homes for investment purposes will retain anti- deficiency protection, at least with respect to purchase money loans. Finally, the amendments satisfy constitutional concerns by making clear that they will apply only prospectively to loans originated after December 31, 2014. The former version of the statute will continue to apply to loans originated before that date. As for the retrospective application of Mueller, the Arizona Supreme Court overruled it in their 2015 decision BMO v. Wildwood Creek Ranch. 36 In that opinion the court clarified that a threshold requirement for a property to be considered “utilized for a dwelling” is that construction must be completed, irrespective of the borrower’s intent. CONCLUSION The bursting of the housing bubble brought with it a renewed focus on the meaning, intent, and short-comings of Arizona’s anti-deficiency statutes. Uncertainty and unhappi- ness over these issues gave rise to fierce litigation and heated debate among attorneys and scholars. Given the cyclical nature of our economy, it is unlikely that deficiency actions will be relegated entirely to the past. These most recent amendments to the anti-deficiency statutes should help stem the tide of future litigation, or at least make the outcome more predictable, by restoring clarity to the breadth of the statutes. For now, at least, the major players in the battle for anti- deficiency reform appear to have put down their arms, freeing them to join forces in the mission to restore economic prosper- ity to Arizona. 13 WINTER 2015