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.
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