Paul Clark
In this Blog we open the conversation with
economic loss caused by the current mortgage
crisis.
Arkansas Foreclosure Law Summary
Quick Facts
- Judicial Foreclosure Available: Yes
- Non-Judicial Foreclosure Available: Yes
- Primary Security Instruments: Deed of
Trust, Mortgage
- Timeline: Typically 120 days
- Right of Redemption: Varies
- Deficiency Judgments Allowed: Varies
In Arkansas, lenders
may foreclose on deeds of trusts or mortgages in
default using either a judicial or non-judicial
foreclosure process. However, an appraisal of the
property must be made prior to the schedule date of
foreclosure.
In any foreclosure under a mortgage or deed of trust
in Arkansas, the property must sell for not less
than two-thirds of the appraised value. If it does
not, then it may be offered for sale again within
twelve (12) months. The second sale may be to the
highest bidder without reference to the previous
appraisal.
Judicial Foreclosure
In judicial foreclosure, a court decrees the amount
of the borrowers debt and gives him or her a short
time to pay. If the borrower fails to pay within
that time, then the clerk of the court, as
commissioner, advertises the property for sale.
Sales of real property under court order will be on
a credit of not less than three (3) months, but not
more than six (6) months, or on installments to not
more than four (4) months credit overall. To secure
payment, a lien will be retained on the property for
its price and the purchaser must also give a bond
with surety for the amount of the purchase price.
The lender may bid at the sale by crediting a
portion (or all) of the amount the court found was
owed to the lender against the sales price of the
property purchased at the foreclosure sale. If the
real estate does not sell for an amount equal to
what’s due on the mortgage loan, then the lender may
seize other property from the borrower as in an
ordinary judgment.
The borrower has one (1) year from the date of the
sale to redeem the property by paying the amount for
which the property was sold, plus interest.
Non-Judicial Foreclosure
The non-judicial process of foreclosure is used when
a power of sale clause exists in a mortgage or deed
of trust. A "power of sale" clause is the clause in
a deed of trust or mortgage, in which the borrower
pre-authorizes the sale of property to pay off the
balance on a loan in the event of the their default.
In deeds of trust or mortgages where a power of sale
exists, the power given to the lender to sell the
property may be executed by the lender or their
representative, typically referred to as the
trustee. Regulations for this type of foreclosure
process are outlined below in the "Power of Sale
Foreclosure Guidelines".
Power of Sale Foreclosure Guidelines
If the deed of trust or mortgage contains a
power of sale clause and specifies the time,
place and terms of sale, then the specified
procedure must be followed. Otherwise, the
non-judicial power of sale foreclosure is
carried out as follows:
The trustee must record a notice of sale
in the office of the recorder of the county
where the property is located. The
mortgagee's or trustee's notice of default
and intention to sell shall be mailed within
thirty (30) days of the recording of the
notice by certified mail to the borrower.
This includes any borrower of record or of
whom the lender has actual notice. The
notice must also be mailed to anyone who
records a Request for Notice that
specifically described the mortgagee
including its recording information.
Within five (5) days after the notice is
recorded, the trustee must mail, by
certified mail, a copy of the notice of sale
to each of the people who are parties to the
trust deed, except for himself.
Additionally, the notice of default and
intention to sell must appear in a newspaper
in the county where the property is located
once a week for four (4) consecutive weeks,
with the last notice being published not
less than ten (10) days prior to the date of
the sale.
Said notice of default and intention to sell
must contain the names of the parties to the
mortgage or deed of trust, a legal
description of the trust property and, if
applicable, the street address of the
property, the book and page numbers where
the mortgage or deed of trust is recorded or
the recorder's document number, the default
for which foreclosure is made, the
mortgagee's or trustee's intention to sell
the trust property to satisfy the
obligation, including, in conspicuous type,
a warning as follows: "YOU MAY LOSE YOUR
PROPERTY IF YOU DO NOT TAKE IMMEDIATE
ACTION" and the time, date, and place of
sale.
Any person including the mortgagee
(lender) may bid at the sale, except the
trustee, who may bid on the behalf of the
beneficiary (lender) but not for himself or
herself in deed of trust sales. The high
bidder must pay the price bid at the time of
sale, or within ten (10) days. The lender
may bid by canceling out what it is owed on
the loan, including unpaid taxes, insurance,
costs or sale and maintenance, but for cash
for any higher price.
The trustee may postpone the sale by public
proclamation at the time, place and date
last appointed for sale, up to seven (7)
days past the original date, but if for a
longer time, then the whole notice procedure
must be performed a second time, including
the sixty (60) day wait.
Once the sale is complete, the proceeds
will go to the pay for the expenses of the
foreclosure sale, then toward the
obligations secured by the trust deed that
was foreclosed and then to junior lien
holders in order of their priority. The
original borrower is entitled to receive any
remaining funds. The successful bidder
receives a trustee’s deed.
The lender may sue the borrower for a deficiency
within twelve (12) months of a power of sale clause
foreclosure. The lender may sue for (1) the
difference between the foreclosure sale price and
the balance due on the loan, or (2) the balance due
on the loan minus the fair market value of the
property, whichever is less.
