Foreclosure Process in Arkansas
Foreclosures operate under the rules and regulations of the state the property lies in, regardless of where the mortgage lender is from. Most states are either lien-theory or title-theory states. Lien-theory states handle foreclosures through the judicial system while title-theory states handle them outside of the court. Arkansas, however, commonly sees both types of foreclosures. It is important to research the type of security document that will be signed when obtaining a mortgage loan, as this will determine the method of foreclosure the lender must follow.
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Pre-Foreclosure
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Banks and mortgage lenders cannot begin the foreclosure process until borrowers default on the loan. The time frame and number of missed payments may vary between lenders. However, two or three consecutive missed payments is generally enough for the lender to try to foreclose on the property. The security instrument signed when you originated the loan should outline the specific terms of the foreclosure process. A deed of trust puts the property in a trust until you pay the loan in full. Almost all deeds of trust contain "power of sale" verbiage that allow the trustee to act on behalf of the lender and auction the property off without going through the court system. A mortgage places a lien on the property until you make the last loan payment. Generally, mortgage documents do not contain the power of sale clause. Arkansas mortgage foreclosures should proceed through the judicial system.
Nonjudicial Foreclosure
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The qualified trustee must file both a notice of default and an intent to sell with the county recorder or clerk to initiate the foreclosure process. The intent to sell must state information including the property address and the date and time of the proposed sale. Within 30 days, lenders must notify borrowers of both the default and intent to sell via certified mail, reports RealtyTrac. After recording the documents, the lender cannot partake in any other foreclosure action against this property or the borrowers for at least 60 days. During this time, you can remit payment to the lender to stop the pending foreclosure sale. The payment will be equal to the unpaid loan balance and any fees and interest that accrued since the default occurred. After 60 days, Foreclosure.com indicates, the lender must start advertising the foreclosure sale in public newspapers in the county for at least four weeks.
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Judicial Foreclosure
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When no power of sale clause exists, the mortgage lender must begin the foreclosure procedure through the judicial system. This begins when the lender files a formal complaint, or "lis pendens," which means "pending legal action" in Latin. If you do not respond to the complaint within the time frame determined by the court, the court will enter a ruling. If the lender wins the case, the judgment will be the monetary amount owed to the lender.
Sale or Redemption
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The nonjudicial route of foreclosure generally ends with a trustee's sale if you are unable to remit a payment. The sale progresses in an auction format, with the highest bidder winning the property. Arkansas law stipulates that the property cannot be sold for less than two-thirds of the unpaid loan balance, notes Foreclosure.com. This is different from most other states, where the starting bids usually begin at the total unpaid balance. Judicially foreclosed property sells in much the same fashion, only the trustee does not act as the auctioneer. In Arkansas, property sold in a judicial foreclosure has a right of redemption period of one year.
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