After a borrower's home has been foreclosed upon in Arkansas, it is widely believed that a stressful process is over. Not quite. There is the possibility that a lender may pursue a deficiency judgment against the displaced Arkansas borrower.
What is a Deficiency Judgment?
A deficiency judgment is a money judgment pursued by a lender against a borrower if the sale of the borrower's property in a public foreclosure sale did not generate enough money to pay off the final balance on the mortgage loan attached to the property.
Whether one can be pursued depends on the type of loan given to the borrower and how much the property sells for in the public foreclosure sale.
Deficiency Judgments in Arkansas
Pursuing deficiency judgments: Arkansas. These are generally permissible.
Though Arkansas is moving to a title theory state, where the property's title is held in trust until the full loan amount is paid, the law does allow for lenders to pursue deficiency judgments against a homeowner/borrower under the lien theory.
The lien theory states that property serves as security for the mortgage loan and that title is held in the borrower's name. A mortgage is the paperwork that verifies this lien and full payment of the loan means that the mortgage on the property has been satisfied.
Lenders have the option of pursuing either type of foreclosure against borrowers and regardless of the type of foreclosure used, they may seek a deficiency judgment against a borrower if the foreclosure sale did not yield enough money to pay off the mortgage.
However, there are limits to this right. Under Arkansas Statutes, Title 18-50-112 the lender must file the deficiency judgment no later than 12 months after the date of the foreclosure sale. The amount sought by the borrower must be either the amount of the outstanding balance subtracted from the market value or the amount of the outstanding balance subtracted from the actual sale price of the home.
This means the lender must pursue a deficiency judgment quickly.
Getting Legal Counsel
This article is merely a general guide and should not be used as legal advice. Arkansas borrowers facing a foreclosure should seek the advice and guidance of a qualified Arkansas foreclosure attorney. The attorney can provide specific information and advice that will be beneficial to a borrower, especially if there is a possibility that a lender will pursue a deficiency judgment.
