Bulletin: AZ2021003

Dear Associates:

The Arizona legislature passed House Bill 2617 (HB2617) in the 2021 legislative session. HB2617 makes substantial changes to the Homestead Exemption and related statutes, amending sections 12-1551, 33-964, 33-1101 and 33-1103, Arizona Revised Statutes. The effective date of HB2617 is January 1, 2022.

What Changed?

The Homestead Exemption was increased from $150,000.00, to $250,000.00.

The Homestead Exemption was changed to allow judgment liens to attach to Homestead property in Arizona.

General Rules

The new law applies to all closings on and after January 1, 2022, regardless of when the judgment lien was obtained or recorded.

Insuring over valid liens is considered an extrahazardous risk. You must consult a Stewart Title Guaranty underwriter before insuring over valid judgment liens.

These rules apply to HOMESTEAD property only. Contact an underwriter to confirm the property is homestead.

ARS 33-1101 defines homestead property as:

Any person eighteen years of age or over, married or single, who resides within this state may hold as a homestead exempt from execution and forced sale, not exceeding $250,000 in value, any one of the following:

1.  The person's interest in real property in one compact body on which exists a dwelling house in which the person resides.
2.  The person's interest in one condominium or cooperative in which the person resides.
3.  A mobile home in which the person resides.
4.  A mobile home in which the person resides plus the land on which that mobile home is located.

All closing costs and fees must be reasonable. Inflated costs and fees may not be used to reduce the amount of sale proceeds or cash to borrower in a refinance transaction.

In calculating proceeds of a sale or refinance, the only items that are not considered proceeds are direct costs associated with the transaction, or payments made to satisfy liens with priority over a judgment lien. If a sale, the reasonable costs of sale are not considered proceeds. Payments of consumer debt are considered proceeds.

The borrower/seller must sign the Stewart Title Guaranty Identified Risk Indemnity for any judgment lien that is subordinated or released pursuant to this Bulletin.

Application of Homestead Rules

Sale

1.  If sale proceeds (including any payment of consumer debt or other obligations) are less than $200,000.00, after payment of voluntary liens and judgments liens that are senior to voluntary liens: The title company may record a Notice of Partial Release** of a junior judgment lien and may pay all sale proceeds to the seller without paying the junior judgment creditor.

a. Upon approval by a Stewart Title Guaranty underwriter, a Notice of Partial Release must be recorded.

b. A copy of the recorded Notice of Partial Release must be mailed to the judgment creditor(s).

2.  If sale proceeds (including any payment of consumer debt or other obligations) are between $200,000.00 and $250,000.00, after payment of voluntary liens and judgments liens that are senior to voluntary liens: Provide Notice of Sale** on statutory form, to judgment lien holder by certified mail, postage prepaid, return receipt requested, wait 20 days for judgment lien holder to object/not object to sale.

• New Notice of Sale must be provided if any proposed payments detailed in the first Notice increase by more than $10,000.

If the lien holder does not object: The title company may record a Notice of Partial Release of the judgment lien.

If the lien holder objects: The property owner may file suit to clear the judgment lien.

NOTE: A judgment creditor may waive the 20-day notice requirement in writing, after which the title company may record the release as required. New notice must still be provided if payments to other lien holders increase by more than $10,000 as required above.

a.  Upon approval by a Stewart Title Guaranty underwriter, a Notice of Partial Release must be recorded.

b.  A copy of the recorded Notice of Partial Release** must be mailed to the judgment creditor. 

3.  Sale proceeds exceed $250,000 (including any payment of consumer debt or other obligations): Obtain a payoff for judgment lien to be paid and released.

a. Judgment must be paid in full, even if the seller ends up getting less than $250,000 in sale proceeds after the judgment is paid.

b. The judgment must be released.

Refinance

1.  If the borrower is not receiving proceeds from the refinance AND if no consumer debt is being paid (credit cards, car loans, etc.): The title company/agent may record a Notice of Subordination** of the judgment lien.

a. Upon approval by a Stewart Title Guaranty underwriter, a Notice of Subordination must be recorded.

b. A copy of the recorded Notice of Subordination** must be mailed to the judgment creditor. 

2.  If the borrower is receiving any proceeds from the refinance OR if consumer debt is being paid:

a. Obtain a payoff from the judgment creditor.

b. The judgment lien must be paid and released.

**Statutory form approved by Stewart Title Guaranty must be used.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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