Taking Notice: Examining the Notice Requirements of the Arkansas Statutory Foreclosure Act By J. P. Sellers
J. P. Sellers is an associate in the Little Rock office of Mackie Wolf Zientz & Mann, P.C. He was admitted to the bar in Arkansas in 2009 and Tennessee in 2012. His practice focuses on creditor’s rights in foreclosure, eviction and asset recovery actions. Mr. Sellers may be contacted via email at jpsellers@mwzmlaw.com. The Arkansas Statutory Foreclosure Act has been highly scrutinized since its enactment in 1987. While the Act was initially lauded by consumer protection groups as an attractive alternative to what was deemed an awkward judicial foreclosure process, critics now declare it is unfair to consumers. Opponents assert that the statutory foreclosure process is unfair to the consumer because it is a quick process without judicial oversight. The Act, as amended in 2011, provides some of the strongest safeguards in the nation for a 6
YLS In brief
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consumer facing a statutory foreclosure. Even after the enactment of the consumer-friendly amendments in 2011, the Act is still vastly unpopular. Currently, the most criticized aspect of the Act is the notice requirement. Unlike its judicial counterpart, personal service is not required in a statutory foreclosure. A close examination of the notice required in a statutory foreclosure will reveal that there is actually more notice required by the statutory foreclosure process than its judicial counterpart. Additionally, the notice provided offers more protection to the consumer. The first notice provided to a consumer facing foreclosure is the demand letter. When an individual fails to make the payments required by the terms of their mortgage or deed of trust the lender will send the individual a letter demanding payment of the past due amount within a specified time period, usually 30 days. The demand letter is sent prior to the initiation of either a judicial or statutory foreclosure. If the loan is not reinstated within the time allotted, the lender will refer the loan to an attorney for foreclosure. If the property is referred for a judicial foreclosure the attorney may immediately file their complaint for foreclosure with the Court. If the lender decides to proceed with a statutory foreclosure the attorney must send additional notice to the consumer prior to initiating foreclosure. Act 885 was enacted in 2011. This amendment to the Arkansas Statutory Foreclosure Act added additional notice requirements and two important safeguards to the statutory foreclosure process. Safeguards similar to those enacted by Act 885 were included in the recent national mortgage settlement and
are required of lenders that participated in the settlement. The fact that these safeguards have already been in practice for two years in the State of Arkansas and are required of all lenders speaks to the strength of the protection offered by the Arkansas Statutory Foreclosure Act. The first safeguard added by Act 885 is what is commonly referred to as the pre-referral letter. The pre-referral letter must be sent by the lender or loan servicer 10 days prior to referring the delinquent loan to an attorney to initiate foreclosure. The letter provides the consumer with the name of the note holder and the location of the original note, a copy of the note with all endorsements, a copy of the security instrument with all assignments, a copy of the payment history evidencing the date of default, and a detailed list of all loss mitigation programs in which the lender participates with contact information for each program. While the information provided in the pre-referral letter is similar to what would be provided to the Court in a judicial foreclosure, it differs in one key aspect. The loss mitigation information provided to the consumer equips them with the means to contact the lender and attempt to avoid the foreclosure sale. Often the lender will provide the consumer with a single point of contact within the loss mitigation department. The single point of contact works with the consumer throughout the loss mitigation review process. By informing the consumer of all of their options to avoid foreclosure, prior to referral to an attorney, it allows the consumer a chance to avoid the foreclosure process altogether. This requirement is not mirrored in the judicial process.