The state of Arkansas allows for both judicial or in court and non judicial or out of court foreclosure. As in all states, where both forms of foreclosure may be used, the deciding factor as to which process will be used is whether or not there is a power of sale clause in the deed of trust or mortgage. When there is a power of sale clause this enables the bank to skip over or by pass the court system in moving towards the sale of the home in question. Being able to avoid filing a law suit to get the courts permission to foreclose saves the bank both time and money. Since it is in the banks best interest, to spend as little money as necessary and move as quickly as possible to the sale of the home, then out of court foreclosure is always the first choice of the lender.
The only time a bank would use in court foreclosure is when there is no power of sale clause. The judicial foreclosure begins with a complaint or lawsuit against the homeowner. When this lawsuit has been successful in getting the court to declare the homeowner officially in default, the court will decree the amount of the home owner’s debt. It will also give them a short period of time during which they must pay that amount of money. If the homeowner is unable to pay that amount of money in this time period, the clerk of the court, as commissioner, advertises the home for sale.
The sale of the home in these circumstances will be done on a credit basis of not less than three months, but not greater than six months. It can also be paid for in installments of no longer than four months time. To secure payment, for the home purchased under court order, a lien will be placed against the property for the sale price. The purchaser must also give a bond with surety for the amount of the purchase price. The bank can bid at the auction by crediting either a portion of or all of the amount the court found was owed ton the bank against the sales price against the sales price of the property purchased at the foreclosure sale. If the home does not sell for as much as was owed to the bank, then the bank can seize other property owned by the homeowner through and ordinary judgment. The bank does this in order to obtain the difference between what the home sold for and what was owed to the bank on the loan.
When judicial foreclosure is used the former home owner has the right to regain ownership of the property for one year following the sale date. This means that if they want their house back and can come up with the purchase price of the home at the foreclosure sale, plus interest, then they can once again own the home.
The power of sale clause that is contained in the deed of trust or mortgage may have very specific instructions as to how, when, and where the sale is to take place. When this is the case, these instructions must be followed. Most power of sale clauses are not so detailed in their instructions. Most non-judicial foreclosures therefore begin with the banks lawyer, usually referred to as a trustee, recording the notice of sale with the county recorders office of the county where the property is located.
The notice of default along with an intention to sell must be mailed by certified mail to the homeowner within thirty days of the recording of the notice of sale.
This notice must also be sent to anyone who records a request for notice. In the first five days following the recording of this notice, the trustee must send by certified mail, a copy of the notice of sale to each of the people who are parties of the trust deed.
The notice of default and intention to sell must be published in a local paper with general circulation in the county where the home is located. This ad must be run once a week for four consecutive weeks. The last of these ads must not be place any sooner than 10 days before the scheduled sale date. This notice of default and intention to sell must have the names of everyone on the trust deed or mortgage in it. It must also have a description of the property. If the home has a street address, it must contain that as well. It must also state the amount owed and in large and conspicuous type state these words “YOU MAY LOSE YOU PROPERTY IF YOU DO NOT TAKE IMMEDIATE ACTION.”
The home will be sold to the highest bidder at the auction sale. This may even include the bank. The person placing the highest bid for the home must have the total purchase price of that bid the day of the sale or within ten days of the sale. The sale may be postponed at the banks discretion. If this postponement is seven days or less from the original sale date, then the postponement needs only to be announced by the banks lawyer at the time the sale was to be held. If the postponement is longer than seven days, the whole notice procedure must be followed again. This includes a 60 day waiting period. The winning bidder at the sale receives a trustee’s deed.
Deficiency judgments are allowed in this state. This means that for one year following the sale of the home, the bank can sue the former homeowner for either the difference between what the house sold for and what was owed or the balance due on the loan minus the fair market value of the home, whichever is less
