Monday, November 14, 2011

Arkansas Federal Judge To 'Non-Judicial' Foreclosing Banksters Unauthorized To Do Business In State: 'Take A Hike!'

Self-described rogue journalist and recovering attorney Ethan C. Nobles writes in First Arkansas News:

  • The U.S. Bankruptcy Court for the Eastern District of Arkansas, Jonesboro Division, ruled on a case at the end of September that may well have a substantial impact on non-judicial foreclosure proceedings in the state.

  • Before getting into that, it’s worth mentioning that Arkansas is one of about half of the state in the Union that allow non-judicial foreclosures. All states, of course, allow a creditor to foreclose on a home through the courts system, but not all of them have non-judicial procedures in place.

  • Non-judicial foreclosures are, indeed, less costly for lenders and expedited. For those reasons, the non-judicial foreclosure process has become the most popular route for lenders to take when they deem it necessary to take homes from defaulting borrowers.

  • According to companies dealing with foreclosures, the case of In Re Johnson (case nos. 3:10-bk-19119, 3:11-bk-10602 and 3:10-bk-16541 in the Eastern District of Arkansas, Jonesoboro Division) has caused the number of foreclosure proceedings to drop significantly since the court issued its ruling on Sept. 28.

  • In a nutshell, the court found that lenders not authorized to do business in Arkansas can’t properly utilize the state’s Statutory Foreclosure Act as codified in Ark. Code Ann. §§ 18-50-101 through 18-50-117.(1)

  • The aforementioned non-judicial foreclosure act requires all companies wanting to take back homes under that act must be authorized to do business in the state — a real problem for mortgage companies located out-of-state that are servicing loans paid on by Arkansans.

For more, see Bankruptcy court throws wrench in non-judicial foreclosure proceedings.

See also, Bankruptcy court ruling slows down foreclosure sales in state, indicating that national title insurers may be beginning to slam the brakes on Arkansas realty sales involving homes recently foreclosed in non-judicial proceedings.

For the court ruling, see In Re Johnson, Case Nos. 3:10-bk-19119, 3:11-bk-10602, 3:10-bk-16541 (Bankr. E.D. Ark., Jonesboro Div. September 28, 2011).

Editor's Note: Buried in footnote 4 of the court ruling is this point of interest:

  • The Court notes that counsel for the Debtors argued that a determination that the statute had been violated would make any sale under the Statutory Foreclosure Act void ab initio. No property sales actually resulted from the foreclosure proceedings in these cases. The sole dispute in these cases is whether the foreclosure fees and costs incurred through use of Arkansas' non-judicial foreclosure process are owed.

(1) According to the court:

  • Absent compliance with Ark. Code Ann. § 18-50-117, J.P. Morgan's avenue for foreclosing on these properties was that of judicial foreclosure through the courts, not through Arkansas' non-judicial foreclosure process.

The court also made this observation on the Arkansas statutory provisions authorizing the use of non-judicial foreclosure procedings in the state:

  • These statutory provisions must be strictly construed. See Robbins v. M.E.R.S., 2006 WL 3507464, at *1 (Ark. Ct. App. 2006) ("It is also true that the Arkansas Statutory Foreclosure Act, being in derogation of common law, must be strictly construed.")

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