Arizona senator wants to punish strategic foreclosures

Republican Senator Jack Harper from Arizona proposed a new law that would allow banks to try to recoup money lost in foreclosures from homeowners who simply walk away from their properties and unpaid home loans. The senator's proposal comes after a recent study found more than half of the mortgages in the Phoenix area are underwater, indicating consumers might be giving up on home loans due to the economic downturn and just accept foreclosure.

Phoenix Fox affiliate KSAZ reported that currently banks are not allowed to go after homeowners in the event of a foreclosure to recoup money lost on the loan. However, Senator Harper would like to change that to encourage consumers to fight for their property and not allow distressed homes to clog up local housing markets.

"We are one of the few states where you can completely walk away from your mortgage and none of the debt follows," he told the source.

Harper is developing legislation that will apply only to mortgages taken out after the law goes into effect, and it would allow banks to go after a portion of what is owed on the loan. Harper believes banks should be able to claim 20 percent of the loan or the balance of the mortgage from homeowners, whichever is less, the source reported.

Loan Safe reported current Arizona state laws prohibit mortgage lenders from pursuing what is owed on a home loan, dating back to 1971. The law was established to prevent the costly and time-consuming process of taking a foreclosure to court. However, the current housing market is creating a significant number of underwater mortgages in Arizona that makes foreclosure look like a viable option for homeowners who are struggling.

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