By James McPherson, ALAW Partner, Default & Collections
As you may recall from previous updates, Arkansas foreclosure law has been evolving for the past several years as a result of the Davis v. PennyMac opinion from the Arkansas Supreme Court in May 2020. As a result of the Davis decision, the Arkansas Senate passed Act 1108 of 2021 in an attempt to reduce the timeframe within which a mortgagor must file a claim that alleges a foreclosure was improperly conducted. The legislative intent behind the applicability of Act 1108 was to not only prevent the issues caused by Davis in future cases, but to also retroactively limit claims for existing mortgages. Attorneys for our industry (including ALAW) attempted to use the Act’s retroactivity to dismiss applicable, pending claims that call into question the validity of a foreclosure. These attempts led the U.S. District Court for the Eastern District of Arkansas to certify several questions to the Arkansas Supreme Court. In an opinion issued April 6, 2023, the Arkansas Supreme Court addressed the question, “is Act 1108 of 2021 unconstitutional…because it applies retroactively [?]” Alpe v. Federal National Mortgage Association, 2023 Ark. 58, 1, — S.W.3d — (2023). The Court ruled that the Act’s retroactivity provision was unconstitutional for a mortgagor whose claim has vested. Id. The Court reasoned that while permissible retroactivity is first determined through looking at the legislative intent and the plain language of the Act, these are not the sole considerations for the Court. For a Court to determine whether a law is constitutionally retroactive, it must also find that the law does not impair or disturb any previously vested rights– a situation, which allowing Act 1108 to stand, would impair. Id.
The impact to our industry stemming from this ruling seems to be somewhat limited – as Act 1108 does still provide protection to servicers and lenders for foreclosures that were conducted since the Act was codified. For foreclosures that occurred prior to the effective date of Act 1108, servicers and lenders may still face potential liability and uncertainty for foreclosures which failed to strictly comply with the Arkansas non-judicial foreclosure statute.
If you have any questions or concerns about any of these developments in Arkansas – or any other questions about files in Arkansas or the rest of the ALAW footprint, please feel free to contact us at [email protected] or you may contact James McPherson directly at [email protected].