Stop a Foreclosure in Fayetteville: What the Process Is and What to Do
If you are here, chances are that either you or a close one of yours is dealing with foreclosure in Fayetteville or Northwest Arkansas and would like assistance to avert it.
If you’re seeking assistance with preventing a foreclosure in Fayetteville, I’m here to help. First off, let me explain what the foreclosure process looks like for Northwest Arkansas. Then we will go into some useful advice on how to avoid them altogether if possible.
Arkansas Foreclosure Laws and Procedures
Loan servicing and foreclosure must be conducted in accordance with the guidelines set by both federal and state laws. Arkansas, for instance, has particular procedures that banks are mandated to observe when it comes to foreclosures. Most borrowers enjoy protection from several of these regulations. To ensure compliance with the foreclosure standards, loan servicers have an obligation to provide homeowners with various choices so they can prevent their property’s repossession; mitigate losses; monitor every stage of the foreclosure process; plus ensure strict observance of all applicable rules.
In an Arkansas foreclosure, you’ll most likely get the right to:
- get a preforeclosure notice
- apply for loss mitigation
- receive notice of the foreclosure
- receive special protections if you’re in the military
- stop the foreclosure by paying off the overdue payments and bring the loan current
- pay off the loan to prevent a sale
- file for bankruptcy, and
- get any excess money after a foreclosure sale.
What Is Pre-foreclosure?
Defaulting on a property often triggers the pre-foreclosure process, during which time homeowners are given 120 days to resolve their missed payments before foreclosure. However, if legal action or bankruptcy is pending this period may be extended – take advantage of the extra time by contacting your servicer and exploring alternative loss mitigation solutions.
Homeowners in Fayetteville should proactively educate themselves on their rights under applicable federal and state laws, to protect their home from foreclosure. During this period of uncertainty, servicers may impose fees such as late charges or inspection costs; usually they must also inform you about methods for avoiding foreclosures and deliver a pre-foreclosure notification called a demand letter.
It is essential that homeowners know the law: Federal mortgage servicing regulations are supplemented by both national foreclosure protocols and Arkansas’ own specific legislation regarding foreclosures.
What Is the Foreclosure Process in Fayetteville Arkansas?
If you fail to honor your Fayetteville mortgage payments, the bank may initiate either a judicial or nonjudicial foreclosure.
How Judicial Foreclosures Work in Fayetteville Arkansas
If you fail to answer the complaint after being notified by law, the bank will win its lawsuit granting it the authorization for a foreclosure sale. This is called a default judgment. As such, foreclosures occur when banks file suits asking for an order that allows them to proceed with these sales.
If you decide to challenge the foreclosure, a court of law will analyze all evidence and determine who is entitled to prevail. If your lender overcomes this obstacle, a judge will pass down their decision as well as an order for the bank’s foreclosing sale. This command sets out precisely when the bank can offer up your property in an auction with proceeds going towards what remains on your mortgage loan.
How Nonjudicial Foreclosures Work in Fayetteville Arkansas
Banks typically opt for a nonjudicial foreclosure procedure due to its speed and cost-effectiveness. All state laws must be adhered to throughout the process, after which the bank can sell off the property at an auction sale. Not only does this method save time and money, but it is also much more streamlined than traditional judicial proceedings.
The Demand Letter
A borrower will receive a breach letter, otherwise known as a demand letter, that notifies them of their default and provides a time frame to remedy it. If the debt is not fixed within the allotted timeframe, then all funds become due immediately in an accelerated fashion.
In Arkansas, there is no legal requirement to send a demand letter. Therefore, the debtor’s security instrument takes priority and usually allows them 30 days from receipt of the letter to remedy any delinquent payments before their debt is classified as in default. Should they miss this deadline, foreclosure proceedings can begin immediately – accelerating their overall debt amount due.
The Fair Debt Letter
As mandated by the Fair Debt Collection Practices Act (15 US Code 1692g), borrowers are typically issued a Fair Debt Collection Letter following acceleration, which is delivered by the firm managing foreclosure for the mortgage servicer.
This notification shares why you are being defaulted and how much is still owed on your loan, as well as the date it was last paid in full. It further advises that within thirty days of receiving this letter, borrowers have a right to dispute the accuracy of their debt. If such challenge is made during that timeframe, then mortgage servicers must present evidence validating its legitimacy before continuing with foreclosure proceedings.
Arkansas Foreclosure Packet
The Arkansas Foreclosure Act stipulates that the bank must send you a packet of information at least 10 days before starting the foreclosure process. (Ark. Code Ann. § 18-50-103).
Your packet must be delivered to the property address or mailing address, containing essential information and documents such as (1) the bank that holds your mortgage loan and its physical location; (2) access to applicable programs for a forbearance assistance/loan modification by means of phone number plus website and any information about assistance programs available; (3) a copy of the promissory note with all applicable signatures; (4) an exact replica of the mortgage/deed of trust and any assignments if in possession by the lender; (5) payment history proving date default occurred in case said default is due to non-payment.
In 2011, the Arkansas legislature took action to ensure that any debtor facing foreclosure would receive a packet of documents and information before proceedings began. This prevents debtors from being caught off guard by presenting them with all pertinent materials ahead of time. Interestingly, this is not mandatory for judicial foreclosures.
Notice of Default
The Arkansas Foreclosure Act also requires a Notice of Default and Intention to Sale be filed (Ark. Code Ann. §18-50-104). The Notice of Default must be recorded in the property records, and must be mailed to you and anyone who has a lein on the property. It must include a bold warning as follows: “YOU MAY LOSE YOUR PROPERTY IF YOU DO NOT TAKE IMMEDIATE ACTION.”
It must provide the time, date, and place of sale; the recording information of the deed of trust or mortgage to be foreclosed; the names of the parties to the mortgage or deed of trust; the legal description and street address of the property; the default for which the foreclosure is made; and the name, address and phone number of the party initiating the foreclosure. It must be mailed within thirty days after it is recorded in the property records by certified mail and first-class mail.
The notice must also be published in the newspaper for four weeks in a row prior to the foreclosure sale, and be posted both online and at the county courthouse (Ark. Code Ann. §18-50-105). The Act also requires the trustee or attorney-in-fact conducting the sale on behalf of the bank to record an affidavit confirming compliance with the Act’s mailing and publication requirements (Ark. Code Ann. §18-50-106).
With so many notifications sent to a debtor who is facing statutory foreclosure in Arkansas, it may be difficult to prove a “lack of notice” defense against the process.
How Can I Stop a Foreclosure in Fayetteville?
Arkansas law allows you the right to reinstate the mortgage before the sale happens. (Ark. Code Ann. § 18-50-114).
Redeeming the Property Before the Sale
One way to stop a foreclosure is by “redeeming” the property. To redeem, you have to pay off the full amount of the loan before the foreclosure sale. This is the full amount, not just the amount you were behind.
Some states also provide foreclosed borrowers with a redemption period after the foreclosure sale, during which they can buy back the home. But Arkansas law doesn’t provide a redemption period following a nonjudicial foreclosure. (Ark. Code Ann. § 18-50-116(d)(1)).
Filing for Bankruptcy
If you are struggling to avoid foreclosure, bankruptcy could be the most advantageous approach for you. You can prevent a sale without having to pay the amount due straight away and receive five years to make up any shortfall in your loan. In fact, if a foreclosure is set to happen within 24 hours or less, filing for bankruptcy would stop it right on its tracks! As soon as your petition is submitted an “automatic stay” kicks into effect which halts all progress of the repossession.
Under a Chapter 13 Bankruptcy, the bankruptcy court implements an organized payment plan that ensures you can make necessary living expenses while also working to catch up on your past due mortgage payments. This comprehensive strategy not only helps with mortgages but any other creditor-related debts as well. As such, filing for bankruptcy is an effective way of getting back on track financially and regaining control of your finances.
Bankruptcy offers you a single monthly payment, tailored to your disposable income so that the payments remain affordable. This repayment plan usually stretches over three to five years and when it ends successfully, most people are caught up on all their past-due payments and can begin making regular loan repayments again.
What if it Sells for less than I owed?
In a foreclosure, your total debt might be more than the foreclosure sale price. The difference between the total debt and the sale price is called a “deficiency.” For example, say the total debt owed is $250,000, but the home sells for $200,000 at the foreclosure sale. The deficiency is $50,000. In Arkansas, the lender can seek a personal judgment against the debtor to recover the deficiency.
In Arkansas, the lender may file a lawsuit to get a deficiency judgment after a nonjudicial foreclosure. The amount of the judgment will be the lesser of:
- the total debt minus the fair market value of the property or
- the total debt minus the foreclosure sale price. (Bids for less than two-thirds of the entire indebtedness can’t be accepted at the sale.) (Ark. Code Ann. § 18-50-107).
The lawsuit for a deficiency judgment must be filed within 12 months after the sale. (Ark. Code Ann. § 18-50-112).
How to Stop a Deficiency Judgment in Arkansas
If you have a deficiency judgment, bankruptcy may be the best option to deal with that amount owed. It will be an unsecured debt in the bankruptcy court and in most bankruptcies you do not have to pay your unsecured debt back. It will depend on your situation at the time you file, but it most likely is your best option.
Have questions? Contact a bankruptcy lawyer in North Little Rock today or feel free to give us a text or 501.891.6000. We are an experienced law firm that has helped numerous Arkansans stop foreclosures. We offer a free evaluation and can help stop foreclosure. You can click here to schedule your no-risk free consultation. We can help stop the foreclosure process.