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Arkansas Court of Appeals Holds Statute of Limitation Bars Foreclosure Five (5) Years After Acceleration Unless There Is Clear Intent to Abandon the Acceleration
On September 9. 2020, in the case of Ocwen Loan Servicing, LLC v. Oden, 2020 Ark. App. 384, The Arkansas Court of Appeals clarified what is needed to abandon a prior acceleration of a loan for purposes of the statute of limitations. The Court held that the servicer must show a clear intent to abandon a prior acceleration to prevent the expiration of the limitation period.
In Oden, the borrower’s last payment was made in November 2010, and the servicer declared a default on December 2, 2010. The servicer then sent a Notice of Acceleration on March 17, 2011, after which two different non-judicial foreclosures were started then canceled. In 2015 and 2016, eight (8) separate “Delinquency Notices” were sent to the borrows that stated the number of days since the date the loan had become delinquent and the total amount necessary to bring the loan current. In 2017, the borrowers filed a declaratory judgment action claiming that foreclosure was barred by Arkansas’ five (5) year statute of limitations.
Arkansas Bankruptcy Court Reaffirms its Adherence to the “Sale Rule” But Allows Recording of Foreclosure Deed After Bankruptcy Petition Filed
On April 30, 2020, the United States Bankruptcy Court for the Eastern District of Arkansas held that even though a foreclosure sale is not complete until the deed is recorded, a third-party purchaser is still entitled to relief from the automatic stay so that it may record the foreclosure deed, and thus complete the sale, even after the filing of the chapter 13 bankruptcy petition by the debtor. In re King, 614 B.R. 851 (2020).
The Supreme Court of Arkansas recently held that the sale notices used by some Arkansas law firms was too vague to satisfy the requirements of the Arkansas Statutory Foreclosure Act (the “Act”). Davis v. PennyMac Loan Services, LLC, 2020 Ark. 180 (May 7, 2020) In order to initiate a statutory foreclosure, the 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” (emphasis added). The Court found that such boilerplate language was not specific enough description of the default to satisfy the Act. As the attorneys for the borrowers in Davis argued, such vague language does not disclose whether the default that caused the foreclosure was a payment default or some other type of default provided for in the mortgage document such as destruction of the property, making false statements to the lender in order to obtain the loan, or permitting the presence of hazardous substances.
We recommend that servicers check with their attorneys to be sure the language used in their form Notices will survive the scrutiny they will be subjected to in light of Davis. Moreover, servicers and attorneys alike should be cautious of using one-size-fits-all forms that do not take into account the specific type of default for which the foreclosure is made.
Florida-based Padgett Law Group (PLG) announced today that the firm has expanded its Arkansas practice with the acquisition of local default services law firm Dyke & Winzerling, PLC (D&W). The acquisition is effective today, September 1, 2017.
With the acquisition, PLG will add several attorneys, support staff, and an expanded office presence in the state. PLG will maintain a GSE-compliant brick-and-mortar operation in Little Rock, AR, providing a complete suite of default services state-wide for its mortgage servicing clients. PLG already provides national bankruptcy services.
“This acquisition deepens our commitment to performing high quality legal work throughout the state of Arkansas and is a valuable addition to our regional footprint,” said Robyn Padgett, Director of Operations/Chief Operating Officer of Padgett Law Group. She added, “Our clients were eager to see us move into Arkansas and this partnership will allow us to aggressively grow our presence throughout the state.”
“While our name is changing and we’re coming into the larger Padgett Law Group brand, our culture and satisfied client base we’ve built over the years will stay the same. We were looking for a partner that shared our values and that our clients respected. We found that partner in Padgett Law Group. We’re excited about our future in Arkansas,” said J. Dyke, Managing Member Attorney. As part of the transition, Dyke (and attorneys, Mary Winzerling, Mitch Berry and Renee Price) will join the PLG team. Additionally, J. Dyke will act as Arkansas Supervising Attorney for PLG.
Effective immediately, existing D&W email addresses will begin forwarding to PLG accounts (formatted as [first initial] and [lastname]@padgettlaw.net). An updated escalation matrix and firm-wide contact sheet has already been distributed to clients.
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