To Authorize A Mortgagor To Recover Fees In Certain Circumstances Under The Statutory Foreclosure Law.
Summary
HB1238 amends Arkansas’s statutory foreclosure law to allow a mortgagor (borrower/homeowner) to recover reasonable attorney’s fees when a court sets aside a statutory foreclosure sale because the mortgagee (lender) failed to strictly comply with the statutory foreclosure requirements. The bill creates a fee-shifting remedy tied to successful challenges of defective foreclosure sales under the statutory foreclosure provisions.
The bill also limits when those fees may be awarded. A borrower cannot recover attorney’s fees if the parties resolve the debt and foreclosure by mutual agreement, if the borrower files bankruptcy while the foreclosure or related litigation is pending, if the lender acted in good faith reliance on an incorrect title insurance policy, if the lender lacked knowledge of unrecorded debt or later-filed taxes/liens, or if the mortgage is reinstated under existing law. In effect, the bill narrows fee recovery to cases involving strict noncompliance that results in a foreclosure sale being set aside, while protecting lenders in several good-faith or resolved scenarios.
Impact
HB1238 adds a new section to Arkansas Code Title 18, Chapter 50, Subchapter 1, creating an express statutory right for borrowers to seek attorney’s fees in certain statutory foreclosure cases. It affects mortgage lenders, servicers, borrowers, foreclosure counsel, and courts applying Arkansas’s nonjudicial foreclosure procedures, and it reinforces the requirement that mortgagees strictly comply with foreclosure statutes. The bill does not change the underlying foreclosure process itself, but it increases potential litigation exposure for lenders when a sale is invalidated for statutory noncompliance.
Sentiment
The voting history suggests the bill was generally well received and not especially controversial. It passed the House and Senate overwhelmingly, including unanimous Senate concurrence on the amendment, indicating broad bipartisan support for the measure. The lack of committee transcript material also suggests there was little recorded public dispute in the available record.
Contention
The main policy tension is between borrower protections and lender certainty. Supporters likely view the bill as a fairness measure that helps homeowners recover legal costs when a foreclosure sale is invalidated because the lender did not follow the law. Any concerns would come from lenders, title insurers, or foreclosure practitioners worried about increased fee exposure and added litigation risk, though the bill addresses some of those concerns by carving out good-faith mistakes, title insurance errors, bankruptcy, reinstatement, and mutual resolution situations.