Arkansas Foreclosure Laws
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The State of Arkansas is now commonly a title theory state wherein the lender keeps the title of the property till the loan amount is completely paid off.
Arkansas made use of the judicial foreclosure method in the lien theory for quite some time. A lender has the option to follow either of the two methodologies for foreclosure.
A deed of trust in Arkansas is also sometimes called a mortgagees’ deed, a trustee’s deed or quite simply, a mortgage, and is the document that title is secured through.
A promissory note is a document that embodies a promise on the borrower’s behalf, to pay off the loan.
The method primarily used for foreclosure in Arkansas is non-judicial foreclosure. A power of sale clause is usually inserted in the deed of trust at the initial signing of the deed, making it possible for the property to be sold to redeem the said loan. A deed of trust wherein a trustee plays the role of the lender’s representative and/or holds the deed of trust is used in Arkansas. Auctions at courthouses are the common way for foreclosure sales to take place. To make use of this process, a power of sale clause must be included in the deed; and this being a non-judicial process, very strict requirements of notices are in place.
Before foreclosure is initiated, an intention to sell and a notice of default must be recorded by the lender in the county where the property is. Only certain people can act as trustees, these amongst others include attorneys. The loan must currently be in default. For any more foreclosure activity to take place there must at least be sixty day period from the day the notice is issued.
The intention to sell and the notice of default should be sent by certified mail within a period of thirty days from the date of the recording, and the notice must include details like the date of the proposed sale, property information and other relevant information.
The scheduled foreclosures sale has to be published in a newspaper in the county where the property is, for a period of four succeeding weeks, at least once every week. The last of these should occur ten days within the planned sale. A third party internet posting service must be used to publish the notice on the internet and a third party posting service must be used to post the notice at the local courthouse.
The foreclosure sale has to take place in between 10:00 and 16:00 hrs on days other than Saturdays and legal holidays and can take place at either the property’s location or the steps of the courthouse. The auction is conducted by the trustee and goes to the highest bidder. For bids to be accepted they have to cover at least two third of the amount remaining on the loan in question. The sale can be postponed for up to thirty days without requiring any further notice.
Lenders in Arkansas can also opt for a judicial foreclosure through a court, where the foreclosure’s final verdict is reached at by the court. If a power of sale clause is not included in the deed of trust, the lender generally has to seek judicial foreclosure. The property is then sold through a publicly announced sale. A complaint needs to be filed in the court along with a lis pendens, a document which used to make public, the foreclosure on the property.
The documents used are called the mortgage or promissory note; or a security agreement in cases of commercial transactions. The security agreement is, at times, combined with the mortgage document. The filing of a mortgage can also be used to verify the said loan and the repayment terms, which are included in the promissory note.
A non-judicial foreclosure in Arkansas usually takes about a hundred and twenty days to take effect if it goes uncontested; this depends on the time required for various notices. If a borrower files for bankruptcy or chooses to contest the foreclosure in court asking for the sale to be delayed, the process can be deferred.
After the successful bidder is issued the deed of trust under the power of sale clause at the foreclosure sale, a statutory right of redemption is not applicable.
However, if, within a period of twelve months of a judicial foreclosure, a borrower is able to pay the total amount on the un-paid loan including costs, then the borrower has a right to reclaim the property that had been foreclosed upon, this right though, can be waived off in the loan documents at the time the loan documents are prepared.
If a property sells for less than the outstanding amount on the loan in question at the public sale, then a deficiency statement can be obtained by a lender. Within a period of twelve months of the foreclosure sale, a deficiency judgment has to be sought by the lender as mentioned in the power of sale statute (Arkansas Statutes, Title 18-50-112). The deficiency can not be more than either the amount due on the loan minus the sale amount, or the amount due minus the fair market value.
Foreclosures in Arkansas are governed by laws that are part of Arkansas Code, Title 18 (Property), Subtitle 4 (Mortgages and Liens) Chapter 49 (Enforcement of Mortgages—which deals with Judicial foreclosures) or Chapter 50 which deals with Statutory (Non-judicial) Foreclosures.
