Once officially started, the Arkansas foreclosure process usually takes only a few months to complete. Fortunately, most homeowners in Arkansas, and all other states, get a 120-day preforeclosure period under federal law before the lender can start the process.
This waiting period ensures that homeowners who have faced a financial hardship get a fair opportunity to bring the loan current or find another way to avoid losing their home to foreclosure.
In this article, you’ll learn about the steps in an Arkansas foreclosure.
When Can a Foreclosure Start in Arkansas?
Again, a typical Arkansas foreclosure is over in a few months. This short foreclosure period doesn't allow a homeowner (the mortgage borrower) much time to recover from a financial setback, like an illness or losing a job.
But in 2014, a federal law went into effect that gives most owners additional time to get back on their feet. Under this law, in most cases, the lender must hold off on starting the foreclosure process until a mortgage obligation is more than 120 days delinquent before moving forward with a foreclosure under state law. (12 C.F.R. § 1024.41 (2024).)
Foreclosure Types Permitted in Arkansas
In Arkansas, the foreclosing lender can choose between two foreclosure options: a traditional, judicial foreclosure action, or a nonjudicial foreclosure.
A judicial foreclosure uses the court system, so it can take longer and be more expensive than a nonjudicial foreclosure, which doesn’t require court approval. Most lenders choose the nonjudicial process.
Briefly, here’s how both methods work.
How Judicial Foreclosures Work
The foreclosing lender starts the process by filing a lawsuit in court. If the borrower doesn’t respond to the lawsuit—that is, you fail to “appear” in the case—the lender can get a default judgment.
To challenge the foreclosure, you must file an answer to the suit. Then, the case will proceed through the litigation process, and, if the lender wins, the court will enter a decree of foreclosure, allowing the lender to sell the property at auction and apply the proceeds to the amount owed to the lender.
How Nonjudicial Foreclosures Work
With a nonjudicial foreclosure, the lender follows the procedure outlined in state law (discussed below) and sells the property at a foreclosure sale. Court approval isn't required.
How the Nonjudicial Foreclosure Process Works in Arkansas
Because most foreclosures in Arkansas are nonjudicial, that process is outlined here.
Preforeclosure Notice in the Arkansas Foreclosure Process
At least ten days before starting an Arkansas foreclosure, the lender has to send the borrower a notice describing the loan modification assistance available, along with a copy of the loan documents and related information. (Ark. Code § 18-50-103 (2024).)
Notice of Default in an Arkansas Foreclosure
The foreclosure officially starts when the lender (or its attorney) records a "notice of default and intention to sell" (notice of default) with the county recorder. The notice will include the time, date, and place of the foreclosure sale, among other things. The bank must record the notice at least 60 days before the sale, and, within 30 days after recording the notice, the lender must mail a copy to the borrower. (Ark. Code § 18-50-104 (2024).)
Publication
The lender must also publish the notice in a newspaper for four consecutive weeks, post the notice at the county courthouse, and post the notice online. (Ark. Code § 18-50-105 (2024).)
Foreclosure Sale Process in Arkansas
The sale is an auction, open to all bidders. At the sale, the lender usually bids on the property using a "credit bid" rather than bidding cash. With a credit bid, the lender gets a credit up to the amount of the borrower’s debt. But bids for less than two-thirds of entire indebtedness aren’t allowed. (Ark. Code § 18-50-107 (2024).)
The highest bidder at the sale becomes the new owner of the property.
Options Available for Arkansas Borrowers During Foreclosure
A borrower can reinstate a home loan by paying all missed payments and outstanding fees and costs. Under Arkansas law, the borrower can stop the foreclosure by reinstating the loan at any time after the filing of the notice of default and prior to the sale. (Ark. Code § 18-50-114 (2024).)
Or you might qualify for an alternative to foreclosure after applying for a loss mitigation option.
Does Arkansas Allow Deficiency Judgments?
If the amount the home sells for at the foreclosure sale is insufficient to cover the outstanding debt, the difference is a “deficiency.”
Example. Suppose Alice goes through a foreclosure. Her home sells to a new owner at a foreclosure sale for $250,000. Unfortunately, Alice owed $300,000 to the bank at the time of the sale. The deficiency in this example is $50,000.
In some states, the lender can sue the borrower to recover the deficiency amount. Once it gets a deficiency judgment, the lender can then use various collection techniques to then collect the balance, such as a bank levy (the bank turns over the money in your account) or a wage garnishment (your employer deducts money from your paycheck).
Arkansas law allows deficiency judgments.
Deficiency Judgments After Nonjudicial Foreclosures in Arkansas
Arkansas law allows the lender to get a deficiency judgment against a foreclosed borrower after a nonjudicial foreclosure. The lender has 12 months after the foreclosure sale to file its deficiency lawsuit.
The deficiency judgment is limited to the lesser of:
- the total amount owed on the mortgage, including interest, costs, and fees, minus the property's fair market value, or
- the total amount owed on the mortgage, including interest, costs, and fees, minus the foreclosure sale price. (Ark. Code § 18-50-112 (2024).)
But bids for less than two-thirds of entire indebtedness aren’t allowed at the foreclosure sale. (Ark. Code § 18-50-107 (2024).)
Talk to a Foreclosure Lawyer in Arkansas
If you have questions about Arkansas's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.