Foreclosures in Arkansas take only a few months to complete. Fortunately, most homeowners in Arkansas (and all other states) are entitled to a 120-day pre-foreclosure period required by 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 and how long you can expect the process to take.
(For an overview of the foreclosure procedure, read Foreclosure and Your Home: Understanding the Process, Your Rights, and Your Options.)
Payment Must Usually Be Delinquent by 120 Days
If you don’t pay your mortgage payment, the lender will repossess your home. But this won’t happen immediately. The owner of your loan (the original lender or a subsequent purchaser of the loan) or mortgage servicer (the company that manages the account) must follow a particular process, called foreclosure, before taking possession of your property.
A typical Arkansas foreclosure is over in a few months (as well as in many other states). The short foreclosure period doesn't allow a homeowner much time to recover from a financial setback, such as an illness or losing a job. 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 the foreclosure process until a mortgage obligation is more than 120 days delinquent before moving forward with a foreclosure under state law.
(Get details about the federal foreclosure law in Delaying Foreclosure: The Dodd-Frank Act 120-Day Rule.)
Foreclosure Types Used by Arkansas Lenders
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.
Judicial foreclosure. The foreclosing lender starts the process by filing a lawsuit in court. If the homeowner doesn’t respond to the lawsuit (that is, you fail to “appear” in the case), you’ll be held in default and will automatically lose. If, however, you want to challenge the foreclosure, you must file an answer to the suit. 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.
Nonjudicial foreclosure. 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 is not required.
(Learn more about how both types of foreclosure work in the article What Are the Differences Between Judicial and Nonjudicial Foreclosures?)
Nonjudicial Foreclosure in Arkansas
At least ten days before starting an Arkansas foreclosure, the lender must send the homeowner a notice outlining the loan modification assistance available, along with a copy of the loan documents and related information. The foreclosure officially starts when the lender (or its attorney) records a notice of default and intention to sell 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 homeowner. Finally, the lender must publish the notice in a newspaper for four consecutive weeks, post the notice at the county courthouse, and post the notice online.
Getting Current on the Loan to Stop the Foreclosure Sale
An owner can “reinstate” a home loan by paying all missed payments and outstanding fees and costs. In Arkansas, the borrower can stop the foreclosure by reinstating the loan at any time before the sale.
Arkansas law allows the lender to get a deficiency judgment against a foreclosed homeowner.
Understanding 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.” The creditor can sue to recover the deficiency amount, and use various collection techniques to 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).
Time limitation on deficiency judgments. In Arkansas, after the foreclosure sale the lender has 12 months to file its lawsuit.
You can review Arkansas’ nonjudicial foreclosure laws in the Arkansas Code (sections 18-50-101 through 18-50-116).
Questions for Your Attorney
- How long will the foreclosure process take?
- What types of loan modification assistance are available to me?
- Will the lender sue me for a deficiency judgment?