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Arkansas Legislature Amends Statutory Foreclosure Act in Response to Davis v. PennyMac Decision
Last year we alerted our clients and partners to the Arkansas Supreme Court ruling in Davis v. PennyMac Loan Services, LLC, 2020 Ark. 180 (May 7, 2020), wherein the Court held the sale notices used by some Arkansas law firms was too vague to satisfy the requirements of the Arkansas Statutory Foreclosure Act. To initiate a statutory foreclosure, the Statutory Foreclosure Act requires the recording of a Notice of Default and Intention to Sell (“Notice”) that states “the default for which the foreclosure is made.” Ark. Code Ann. § 18-50-104(b). The notice at issue in Davis stated that “a default has been made with respect to a provision in the mortgage.” The Court found that such boilerplate language was not a specific enough description of the default to satisfy the Statutory Foreclosure Act. Fortunately, PLG’s Arkansas foreclosures were not affected by the decision since its Notice contained the language required by the Statutory Foreclosure Act. The Court’s decision, however, created a realm of uncertainty related to statutory foreclosures completed by firms using the faulty notice. The status of all such REO properties became a topic of much concern, and the industry sought to resolve these issues through the passage of legislation amending the Statutory Foreclosure Act during the 2021 Regular Session of the Arkansas General Assembly. Thus, Act 1108 emerged, which will most likely become effective on July 30, 2021, although this date could change due to peculiarities in Arkansas law.
Recognizing the issues the Davis ruling created, The General Assembly stated its intentions for passage of Act 1108 as these:
Accordingly, Act 1108 amends section 18-50-116 of the Statutory Foreclosure Act to state that any claim or defense for failure to strictly comply with the provisions of the Statutory Foreclosure Act “shall be asserted within thirty (30) days of the foreclosure sale to ensure the finality of sales that substantially comply with this chapter.” Prior to Act 1108, there was no such 30-day time limit. Act 1108 also states that it applies retroactively to March 31, 2011. Accordingly, the Arkansas General Assembly accomplished its stated goals by retroactively curing the issues created by the Court’s Davis decision, since all foreclosure sales based on faulty Notices occurred well over 30 days before Act 1108 was passed. This legislation should restore certainty to the REO market in Arkansas.
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