Homeownership in Arkansas is typically just above the national average, previously at a high of 73% it now rests around 65% and is trending slightly up. Home buyers in the Natural State are often on the lookout for special financing options to help speed up the process or to reduce paperwork. Some small investment firms offer hard money loans in Arkansas, where the buyer puts their home or other owned real estate up as collateral to secure the loan. These alternatives to the big banks can often close much faster than a standard mortgage and usually require less paperwork too.
Arkansas Foreclosure Laws
The vast majority of foreclosures in the state of Arkansas are managed outside of the state court system, referred to as non-judicial foreclosure. Some states opt to manage most of these issues inside the court system, and there are some special cases in Arkansas that do allow for a foreclosure to be managed in court but by and large, almost all residential foreclosures in the state are swift and are processed without judges or courtrooms.
Property Redemption after Foreclosure Sale
In some states, homeowners that lose their property in a foreclosure can still redeem (repurchase) the home within a certain period of time, even after the foreclosure. In Arkansas, though, that is not the case. Arkansas homeowners do not have the right to redeem a home after a foreclosure sale. Ark. Code Ann. § 18-50-108.
Deficiency Judgments in Arkansas
When a home is sold in foreclosure, it sometimes will not bring in enough money to cover the borrowers debt that created the need for a foreclosure in the first place. In these cases, the lender can seek a deficiency judgement against the homeowner, making them responsible to pay the remaining balance. In Arkansas, the lender has up to a year after the foreclosure sale to file for deficiency Ark. Code Ann. § 18-50-112.
Deed in Lieu of Foreclosure
There is one way that some homeowners in foreclosure find to make the best of a stressful situation. It's called a deed in lieu of foreclosure and it is an agreement between the lender and the borrower. A deed in lieu of foreclosure represents a truce, or more accurately a surrender. The borrower in default will agree to walk away from the property leaving everything in place. They move out and the lender takes possession immediately. In many cases, the lender is even willing to provide some cash incentive for this kind of agreement to help pay for moving or relocation. Real estate professionals sometimes refer to this kind of agreement as "cash for keys". It doesn't stop the foreclosure but it does stop the fight and allows both parties to move forward without additional argument.
Grace Period Notice
Arkansas does not technically have a grace period built into the foreclosure process, but the foreclosing party must mail a notice to the borrower that includes information about loan modification assistance, among other things, at least ten days before starting a foreclosure. Foreclosing party must also record a notice of default and intent to sell, and then mail a copy by certified and first-class mail to the borrower within 30 days after recording the notice. Notice must also be published in a newspaper consecutively for four weeks prior to sale, posted at the courthouse, and published on the internet.
Service Members Mortgage Protections
Lender may not foreclose on a military service member for nonpayment or any breach occurring during military service without a court order if certain conditions are met. This applies to state National Guard members called into active military service by the governor for more than 180 days. Ark. Code Ann. § 12-62-716
High Risk Mortgage Protections
High risk loans are those that have an unusually high interest rate or maybe a big balloon payment built in. Not all are high risk but if the state views it as predatory or an intentional violation of the Arkansas Home Loan Protection Act, then it the loan agreement can be rendered void. The lender then has no right to collect, receive, or retain any principal, interest, or other charges at all with respect to the loan, and the borrower may recover any payments made under the agreement. Ark. Code Ann. § 23-53-106.
Additional State Laws
The maximum interest rate allowed by law is 17%. Arkansas's legal limits on interest rates is encoded in the state constitution, which says both consumer and non-consumer rates may not be more than 5 percent above the Federal Reserve discount rate (maximum 17 percent for consumer loans). But don't forget that this law does not apply to most bank loans, as explained in the preceding section.
Arkansas is a homestead state. Arkansas' homestead law originates from the state's constitution, but also is encoded in statute. The state allows a maximum exemption amount of $2,500 of one's equity, with a maximum of one acre (1/4 acre minimum) for urban properties and 160 acres if rural. Since Arkansas imposes a $2,500 limit, property owners may choose the federal homestead exemption instead. The federal exemption amount of $22,975 (current as of 2015) may be applied to burial plots and mobile homes as well as homes. Additionally, married couples may double this exemption to $45,950. But keep in mind that federal law requires a 40-month residency prior to declaring this exemption.
Lender Licensing Requirements
A Mortgage Servicer License is required of any person that receives from or on behalf of a borrower funds or credits in payment for a mortgage loan, or the taxes or insurance associated with a mortgage loan.