Arkansas is one of many states that have a statutory foreclosure act, allowing lenders to foreclose without filing a lawsuit. Arkansas enacted its Statutory Foreclosure Act (“the Act”) in 1987 (Ark. Code Ann. §§ 18-50-101 (Supp. 2011). Arkansas also allows for judicial foreclosures, but many lenders choose to avail themselves of the statutory foreclosure process when foreclosing upon residential properties because it is often quicker and less expensive than a lengthy court case. While lack of due process has often been used as an argument against statutory foreclosures, the constitutionality of the Act has been upheld by the Arkansas Supreme Court (Parker v. BankcorpSouth Bank, 369 Ark. 300, 253 S.W.3d 918 (2007)). Moreover, the notice requirements of the standard security instrument and the Act in combination with the notice requirements of the Consumer Financial Protection Bureau (CFPB) result in debtors receiving numerous letters regarding their default, the foreclosure process, and possible options to avoid foreclosure. Arguably, debtors now receive so many notices that they may start opting to simply disregard or ignore many of them.
In Parker v. In the case, the debtor alleged that the Act violated procedural due process because the notice requirement failed to give an individual notice of what to do in the event he or she wanted to contest the propriety of the foreclosure action. Because there is no state action or involvement, the court found there could be no due process violation (Id at 307-311, 253 W.S.3d at 923-925). Despite the ruling in Parker disposing of a due process violation, a common argument against statutory foreclosures continues to be a lack of adequate notice. Upon a close examination of the many notices received by debtors upon default and during the foreclosure process, this argument falls short. In fact, an argument could be made that debtors in a statutory foreclosure in Arkansas receive more notices than debtors in a typical judicial foreclosure action.
The letter provides the reason for default, the amount of the debt, and the total amount currently due on the loan as of the date of the letter
In a typical statutory foreclosure in Arkansas, the first notice the borrower receives in the mail is a demand letter, also referred to as a breach letter, which advises the debtor of the default and provides a specific amount of time to cure the default. If not timely cured, the letter advises the debt will be accelerated and the full amount immediately due. There is no statutory guidance on the requirements of the demand letter in Arkansas. Therefore, the terms of the debtor’s security instrument govern. The standard security instrument allows the borrower approximately thirty days to cure the default before acceleration. If the default is not timely cured, the debt is accelerated, and foreclosure commenced.
BankcorpSouth Bank, the Arkansas Supreme Court decided that no state action is involved in the Arkansas statutory process, and thus there can be no constitutional due process violation
The first notice the borrower typically receives after acceleration is what is commonly referred to as a Fair Debt Letter, pursuant to the Fair Debt Collection Practices Act (15 U.S.C.S. § 1692g). This letter is typically the first communication from the trustee firm conducting the foreclosure for the mortgage servicer. It also advises the borrower is afforded thirty days from receipt of the letter to dispute the validity of the debt. If payday loans Alabama the debtor timely disputes the debt, the debt must be validated by the mortgage servicer prior to proceeding with the foreclosure sale. While the Fair Debt Letter allows thirty days to dispute, many mortgage servicers and their foreclosure counsel will make every effort to provide the debtor proof of validation even when the dispute is not received timely.