Arkansas Foreclosure Laws

Foreclosure laws are the legal procedures by which a lender repossesses collateral for a loan which is in default. These laws are normally applied when one defaults on mortgage repayments. The lender therefore obtains legal right to sell off the property due to non payment by the owner.

Arkansas has been a lien theory state where title is held in the name of the borrower and the property acts as security, but it is now moving to a title theory state. This is where property title is held in trust by the lender until full payment is received from the borrower. A deed of trust document secures title in this state.

Non judicial foreclosure

The primary method of foreclosure in this state is non judicial foreclosure. The deed of trust document contains a power of sale clause, which allow sale of property to satisfy the underlying loan if the borrower defaults on payments. An auction is typically held at the court house. When dealing with a non judicial foreclosure, very strict notice requirements and legal documents that contain the power of sale language are required.

The notice requirements are:

l A notice of default along with an intention to sell must be filed by the lender in the county where the said property is located. The law stipulated that 60 days must elapse before any further action is taken.

l The 2 documents stated above must be mailed to the borrower within 30 days from the date of recording with details on the property, date of the auction and any other relevant details. The notice must then be published in a newspaper circulation in the county where the property is, at least once a week for 4 weeks, with the final publication appearing within 10 days of the proposed auction. The lender must use a third party posting services to post the notice at the courthouse and in the internet.

l Auctions are held between 10am and 4pm and can be held on any day other than weekends and public holidays at the court house or at the property. The property will be sold to the highest bidder and each bid must be at least 2/3 of the outstanding loan amount. The auction maybe postponed without notice unless postponement is for more than 30 days.

Judicial foreclosure

This state also allows for a judicial foreclosure where a ruling of foreclosure must be obtained from a judge. This happens when the deed of trust does not contain power of sale language or when a standard mortgage is used to secure title. A complaint is filed in the circuit court as well as a lis pendens document. This is a public notice document that indicates that a property has a suit pending on it.

Process period

A non-judicial foreclosure that is not contested takes approximately 120 days to effect depending on the time taken to process the required notices. This process may take longer if the borrower contests the action in court seeking adjournment of auction or files for bankruptcy.

Redemption

The state of Arkansas does not provided for a statutory right of redemption once a deed of trust under power of sale is issued to the successful bidder. The borrower therefore cannot reclaim the property after a non judicial foreclosure. In a judicial foreclosure the court can allow redemption within one year if the loan document does not stipulate otherwise.

Deficiency judgment

The state of Arkansas allows for the court to issue a deficiency judgment when property is foreclosed for less that the loan amount secured by the mortgage. A deficiency judgment must be sought within 12 months of foreclosure

Foreclosure laws may change from time to time. It is therefore important to seek advice from a qualified attorney as a borrower or lender to ensure that you obtain up to date details on the laws of foreclosure in any state.