Arkansas Foreclosure Law
- Judicial Foreclosure Available: Yes
- Non-Judicial Foreclosure Available: Yes
- Primary Security Instruments: Deed of Trust, Mortgage
- Timeline: Usually 120 days
- Right of Redemption1: Varies
- Deficiency Judgments2 Allowed: Varies
Lenders in the state of Arkansas may foreclose on deeds of trusts or mortgages in default using either a non-judicial or judicial foreclosure process.
The law also requires that a property appraisal be completed prior to the date of foreclosure. Furthermore, any foreclosure involving a property that is under a mortgage or deed of trust requires that the property sell for not less than two-thirds of the appraised value. If the property does not sell at that amount, it may be offered for sale again within twelve (12) months. The second sale may be to the highest bidder without reference to the past appraisal.
Judicial Foreclosure
Under the statutes governing the judicial foreclosure process, the court sets the amount of the borrower’s debt and allows them a short period to time in which to pay. If the borrower fails to pay within that time frame, the clerk of court, acting as commissioner, advertises the property for sale.
Under court order, sales of property 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. The court secures payment by retaining a lien on the property for the price and the buyer must also provide 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 property does not sell for an amount equal to what’s due on the mortgage, 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
If a power of sale clause exists in the deed of trust or mortgage document, a non-judicial process of foreclosure is used. This allows the lender to sell the property and pay off the balance of the loan in the event the homeowner defaults. The power to sell may be completed by the lender or their representative (also called a trustee) in situations where a power of sale exists. The procedure for this type of foreclosure process is explained in the "Power of Sale Foreclosure Procedure" listed below.
Power of Sale Foreclosure Procedure
If the deed of trust or mortgage has a power of sale clause and it details the time, place and terms of sale, then the outlined procedure must be followed. However, if the power of sale clause, does not clarify the time, place and terms of sale, then a foreclosure sale must be handled in the following manner:
- The trustee must record a notice of sale in the office of the recorder of the county where the property is located. The lender’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. Also receiving notice of the sale is the borrower or anyone whom the lender has on record as receiving such notices, and anyone who has filed a Request for that specifically described the lender and the recording information.
- 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, excluding themselves, within five (5) days after the notice is recorded. The notice of default and intention to sell must be advertised in a newspaper in the county where the property is located once a week for four (4) successive weeks, with the last notice being published not less than ten (10) days prior to the date of the sale.
- The notice of default and intention to sell must contain specific language. In noticeable type, the following warning must appear in the default notice: "YOU MAY LOSE YOUR PROPERTY IF YOU DO NOT TAKE IMMEDIATE ACTION". Other information included: the time, date, and place of sale, 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, and the lender’s or trustee's intention to sell the property to satisfy the obligation.
- Anyone may bid at the public auction sale. The highest bidder is the winner. The lender, or their trustee acting upon their behalf, may bid. The winning bidder may choose to either pay the bid price at the time of sale or is allowed to pay it within ten (10) days after the sale. The lender may bid on credit by canceling out what it is owed on the loan, including unpaid taxes, insurance, costs or sale and maintenance. However, if the lender chooses to bid any amount higher than that, the bid must be for cash.
- The trustee may postpone the sale for up to seven (7) days past the original date by giving public notice at the place and date last appointed for sale. A sale postponed for more than seven (7) days requires that the entire notice procedure including the sixty (60) day waiting period be performed again.
The profits from the sale first go to pay for the expenses of the foreclosure sale. Any remaining amount will be applied to the obligations secured by the trust deed that was foreclosed and then to junior lien holders in order of their priority. If there are any remaining funds, they are given to the original borrower. The successful bidder receives the trustee’s deed.
The borrower is not entitled to a right of redemption under a power of sale foreclosure proceeding.
The lender is allowed to sue the borrower for any deficiency within twelve (12) months of a power of sale clause foreclosure. The lender may sue for:
- the difference between the foreclosure sale price and the balance due on the loan, or
- the balance due on the loan minus the fair market value of the property, whichever is less.
1 A borrower’s right to reacquire property lost due to a foreclosure.
2 A personal judgment against the borrower for the remaining balance on the loan after a foreclosure sale.
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