Once officially started, a foreclosure in Arkansas usually takes only a few months to complete. Fortunately, most homeowners in Arkansas—and all other states—are entitled to 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.

Payment Must Usually Be Delinquent by 120 Days

If you don’t pay your mortgage payments, the lender will foreclose your home. But this won’t happen immediately. The mortgage servicer (the company that manages the account) must follow a particular process before selling your property to a new owner at a foreclosure sale.

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 (the mortgage borrower) much time to recover from a financial setback, like 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 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.

Judicial foreclosure. 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—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

Here are the basic steps in a nonjudicial foreclosure under Arkansas law:

• Preforeclosure notice. At least ten days before starting an Arkansas foreclosure, the lender must send the borrower a notice outlining the loan modification assistance available, along with a copy of the loan documents and related information. (Ark. Code Ann. § 18-50-103).
• Notice of default. 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 Ann. § 18-50-104).
• Publication. 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. (Ark. Code Ann. § 18-50-105).

Getting Current on the Loan to Stop the Foreclosure Sale

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 Ann. § 18-50-114).

Deficiency Judgments: What Are They?

If the amount the home sells for at the foreclosure sale is insufficient to cover the outstanding debt, the difference is a “deficiency.” For example, suppose Alice goes through a foreclosure. Her home sells to a new owner at a foreclosure sale for $150,000. Unfortunately, Alice owed $200,000 to the bank at the time of the sale. The deficiency in this example is $50,000.

In certain states, 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).

Deficiency Judgments in Arkansas

Arkansas law allows the lender to get a deficiency judgment against a foreclosed borrower.

Deficiency judgments after nonjudicial foreclosures. In Arkansas, after the foreclosure sale the lender has 12 months 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 fair market value of the property, or
• the foreclosure sale price. (Ark. Code Ann. § 18-50-112).

Deficiency judgments in judicial foreclosures. In a judicial foreclosure, a bank may recover the full amount of the deficiency. (Ark. Code Ann. § 18-49-105).

Finding the Law

You can review Arkansas’ nonjudicial foreclosure laws in the Arkansas Code (§§ 18-50-101 through 18-50-116). (To learn how to find the citations in this article, see How to Look Up the Foreclosure Laws in Your State.)

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?