HB1238
To Authorize A Mortgagor To Recover Fees In Certain Circumstances Under The Statutory Foreclosure Law.
AI-Generated Summary
This bill proposes to amend Arkansas law concerning statutory foreclosures. It aims to authorize a mortgagor to recover reasonable attorney's fees in specific circumstances. The provision allows for fee recovery if a court sets aside a statutory foreclosure sale. This would occur due to the mortgagee's failure to strictly comply with relevant statutory provisions. However, the bill outlines several exceptions where a mortgagor would not be awarded attorney's fees. These exceptions include situations where the mortgagor and mortgagee reach a mutual resolution. Another exception is if the mortgagor files for bankruptcy during the foreclosure process or related litigation. The bill also exempts the mortgagee from paying fees if they acted in good faith and relied on an erroneous title insurance policy. Additional exceptions involve good faith actions by the mortgagee without knowledge of unrecorded debts, assessments, taxes, or liens. Finally, if the mortgage is reinstated, the mortgagor cannot recover fees.
Potential Impact Analysis
Who Might Benefit?
The primary beneficiaries of this bill, if enacted, would be mortgagors (homeowners or property owners who have taken out a mortgage). Specifically, mortgagors who are involved in a statutory foreclosure process and can demonstrate that the mortgagee failed to strictly adhere to foreclosure laws, leading to a sale being set aside by a court, would be able to recover their attorney's fees. This could reduce the financial burden on individuals facing foreclosure when procedural errors by the lender are the cause of the sale's invalidation.
Who Might Suffer?
The entities most likely to be negatively impacted by this bill are mortgagees (lenders) and potentially title insurance companies. Mortgagees could face increased financial exposure through having to pay the mortgagor's attorney's fees in cases where a statutory foreclosure sale is invalidated due to non-compliance with statutory provisions. This could incentivize greater diligence in adhering to foreclosure procedures. Title insurance companies might also see increased liability if their policies lead to erroneous foreclosure actions by mortgagees, although the bill includes exceptions for good faith reliance on such policies. The exceptions, however, are specific and do not cover all potential errors.