Arkansas Foreclosure Law
Arkansas Foreclosure Law allows Judicial and Non-Judicial processes to foreclose deeds of trust or mortgages in default. However, an appraisal of the property must be made before the foreclosure. The typical time of process last about 120 days and the deeds of trust and mortgages are the security instruments used. Deficiency Judgments and the Right of Redemption depend upon the process employed.
In any foreclosure, the property must sell for at least two-thirds of the appraised value. If not, it may be offered for resale within 12 months. The second sale may be awarded to the highest bidder without reference to the previous appraisal.
In Judicial Foreclosure, the court gives the borrower a short amount of time to pay. If the borrower fails, then the property will be advertised for sale. Sales under court order will be on credit from 3 – 6 months or on installments for not more than 4 months. To secure payment, a lien will be retained on the property and the purchaser must give a bond with surety for the purchase price.
The lender may bid by crediting the amount owed to him against the price of the property. If the property is sold for less than the amount owed, the lender may seize other properties from the borrower.
The borrower has 1 year from the date of sale to redeem the property by paying the acquisition price plus interest.
Non-Judicial Foreclosure is used when a power of sale clause exists in the security instruments. “Power of Sale” is the process wherein the borrower agrees to sell the property in case of default. The lender or their representative, referred to as the “trustee,” may execute the “power of sale.”
Power of Sale Foreclosure Guideline
Should the security instruments contain a power of sale clause, the terms therein should be followed. Otherwise, it should be carried out through the following process:
- The trustee must file a notice of default in the Office of the County Recorder.
- The notice and intention to sell must be served to the borrower within 30 days of the recording, as well as all known borrowers of record and anyone who records a Request for Notice. It must also be published in the county’s newspaper once a week for 4 consecutive weeks, with the last published at least 10 days before the sale.
- The notice must state the names of the parties in the mortgage/deed, the book and page where the deed is recorded; description of the property; borrower’s default; amount owed; lender’s intent to sell; and the date, time, and place of the sale. A warning in conspicuous type should also be included.
- Any person including the lender may bid at the auction. The lender may use a “credit bid,” where instead of paying cash, it would cancel out, in part or in full the amount owed by the borrower plus other expenses incurred. The winning bidder must pay the bid amount within 10 days.
- The trustee may postpone the sale for up to 7 days by a proclamation on the original schedule; the whole notice procedure must be performed a second time for a longer postponement.
- Once the sale is completed, the proceeds will go to the payment of the obligations of the property, then to the junior lien holders in order of their priority. The winning bidder gets a trustee’s deed while the borrower is entitled to any remaining funds.
The lender may sue the borrower for deficiency within 12 months for the disparity of the sale price and the balance due on the loan or the balance due on the loan minus the market value of the property, whichever is less.
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