Do you know what happens when homeowners struggle to pay their mortgage? Financial problems – possibly even foreclosure of their home. It’s important to understand Arkansas laws on how foreclosure works. Hearing the word foreclosure can bring a lot of emotions including panic and uneasiness. Understanding Arkansas foreclosure laws can help homeowners get answers to their questions and gain a clearer view of what to expect if you are faced with the possibility of foreclosure.
This article will talk about foreclosure types, specifically the difference between judicial and non-judicial foreclosures. This knowledge will help you understand the next steps you may face and create an action plan.
Arkansas Foreclosure Laws Every Homeowner Should Know
In Arkansas, homeowners are at risk of losing their house if they miss mortgage payments. Lenders have the right to take the house away. Why? Mortgage agreements require payment, and when payment is not made, lenders have the right to take action.
Knowing foreclosure laws can help homeowners know how to handle the situation better and what to expect. Being informed of the laws can help give you more time to explore your options, whether finding ways to settle your payments, negotiating with the lender, or seeking legal advice. Having knowledge of all these can help you protect your property.
Understanding the Different Types of Foreclosures
There are two types of foreclosures in Arkansas:
- Judicial Foreclosure
- Non-Judicial Foreclosure
Both foreclosure types let lenders take back the property, but they happen differently. Knowing which one fits your situation helps you understand the potential next steps.
The Difference Between Judicial vs. Non-Judicial Foreclosure
Judicial Foreclosure
A judicial foreclosure moves through the courts. This process takes longer but also gives the homeowner more time to find a solution.
Here’s of how it happens:
- Lender Starts a Lawsuit: The lender goes to court to show the homeowner’s missed payments. The lender must provide proof that the homeowner has not been paying the required amount stated on the loan.
- Court Decides: If the court agrees, the property can now be sold to cover the debt.
- Public Auction: The property now will be up for sale. Then the property goes to the highest bidder. The payment collected will be used to pay off the remaining balance of the loan.
Judicial foreclosures take longer because courts get involved. The homeowner might slow or completely stop things by defending themselves in court.
Non-Judicial Foreclosure
A non-judicial foreclosure is a type of foreclosure process that occurs without court involvement. It is typically used when a mortgage or deed of trust contains a “power of sale” clause. This clause allows the property to be sold by the lender if the homeowner has defaulted on the loan payment.
Here’s of how it happens:
- Power of Sale Clause: The loan agreement (usually a deed of trust) includes a provision giving the lender the right to sell the property to recover the loan amount in case of default.
- Notice of Default: The lender must notify the borrower that they are in default and give them a chance to catch up on missed payments.
- Public Notice: After the notice period, the lender must publish a notice of sale in public records (often in a local newspaper) for a specific period, as required by state law.
- Auction or Sale: If the borrower does not resolve the default, the property is auctioned to the highest bidder or sold outright.
- No Court Involvement: Unlike a judicial foreclosure, the non-judicial process does not require a court’s oversight, which makes it faster and less expensive for the lender.
Non-judicial foreclosures happen faster and cost less for the lender. This is why they are very common in Arkansas.
Essential Tips for Handling Foreclosure in Arkansas
If you are faced with the challenge of possibly losing your property in Arkansas, here is some information that might be beneficial for you.
- Know Your Rights
Arkansas has laws to protect you and the bank. Learn these rules so you know what’s fair. For example, even if the court is not involved, a letter saying you missed payments must arrive first before anything happens.
- Communicate With Your Lender
Talking to your bank might be hard, but it is important. Sometimes, banks agree to new payment plans or even allow smaller payments for a while. Do this early for better chances.
- Consider Loan Modification or Refinancing
Finding it tough to pay? Ask for changes to your loan. The bank could offer different options to make things easier for you. Sometimes replacing the old loan with a new one with better terms could help.
- Seek Professional Help
Feeling confused about what to do? Ask a lawyer or housing expert. They can also speak to the bank for you when needed.
- Stay Proactive and Organized
Time matters. Read all letters about your home and loan situation. Being organized helps to avoid missing anything important.
Let Alto Home Buyers Help You Avoid Foreclosure
One way to act fast is to sell your house to a cash buyer and we’re here to help you! Alto Home Buyers will help you skip the slow process of foreclosure. You could get a fair cash offer and finish the sale in just a few days. Does this sound useful? Contact us today!