Arizona legislators responded quickly last June when bankers complained that investor-builders were abusing a post-foreclosure protection intended for homeowners.
Within 23 days, a bill to give lenders more leeway to sue former owners of foreclosed properties had been proposed, considered and approved by the Legislature.
But after hearing complaints about unintended consequences and a lawsuit, lawmakers beat a retreat: They repealed the changes they'd made to the law that generally bars lenders from suing homeowners for the difference between what is owed on a house and what the bank can sell it for.
On Monday, Gov. Jan Brewer signed the bill, which was approved during a special session mostly devoted to the state's budget problems. The post-foreclosure protections formerly enjoyed by Arizonans are again in place, at least for now.
Legislators said they're willing to again consider bankers' requests for changes. That could happen as early as a contemplated December special session, but some lawmakers say they don't want to rush it again.
"Rushing things through is sort of how we got egg on our face the first time on this bill," said Sen. Pamela Gorman, R-Anthem. "Let's not rush this. It's not an emergency."
The Arizona Bankers Associations had told lawmakers back in June that community banks were being hurt by "spec" homebuilders using the law to walk away from loans on houses they had built.
After the bill was passed, however, Realtors complained that it also affected "anti-deficiency" protections for other homeowners, such as owners of second homes or people who own homes occupied by relatives.
And the already struggling housing industry would be weakened further if post-foreclosure suits drove more people into bankruptcy, said Tom Farley, a Realtors lobbyist.
The Legislature responded by repealing the changes in August, only to draw a lawsuit in which the bankers group, which alleged the move wasn't legal because the issue wasn't part of the formal call for special session action.
The issue was included in the call for the latest special session, which began last week and ended Monday. Lawmakers were presented a compromise negotiated by builders, Realtors and homebuilders. It would have repealed all changes but allowed anti-deficiency suits against homes built for resale.
But legislators balked at that proposal, saying they didn't want to rush consideration of the troublesome issue, instead preferring to start over.
It doesn't matter that the industry lobbyists were satisfied with the changes, said Gorman, who rewrote the proposed amendment last week. "We're the elected people down here," Gorman told her Senate colleagues.
Representatives of bankers and Realtors said they'd continue working on compromise legislation.
In the meantime, the bankers would reconsider their legal position with the repeal of the previous legislation.
"If there's an opportunity to continue pursuing the lawsuit, we will do that," said Tanya Wheeless, the bankers association's president. "We're exploring all of our options but I wouldn't say we're overly optimistic."