AR Act 206 Amends State Code to Allow Fee Recovery in Specific Circumstances

Arkansas Act 306, authorizing a Mortgagor to recover fees in certain circumstances under the statutory foreclosure law, takes effect August 4, 2025

Act 306 amends the Arkansas Code concerning statutory foreclosures by introducing a new section that allows a mortgagor to recover reasonable attorney's fees under specific circumstances. According to the new provision, a mortgagor can seek these fees if a court sets aside a statutory foreclosure sale due to the mortgagee's failure to comply with relevant legal provisions.

The new legal language added to the Arkansas Code includes the specific criteria for fee recovery and the exceptions that would prevent such recovery. This amendment aims to clarify the rights of mortgagors in foreclosure situations and provides a means to recover legal costs when appropriate. However, the Act also provides important protections for mortgagees. Attorney’s fees cannot be awarded if the mortgagor and mortgagee reach a mutual resolution, if the mortgagor files for bankruptcy during the foreclosure process, or if the mortgagee acted in good faith—for instance, by relying on title insurance or lacking knowledge of specific liens or debts, or if the mortgagor reinstates.

The statute specifically sets out that the fees are permissive, not mandatory, by statute. It would be within a Court’s discretion as to whether to award said fees to the mortgagor(s). We encourage a review of internal and external processes for compliance with the provisions of AR Code § 18-50-101 et seq., AR Code § 18-50-117 to avoid an award of attorney’s fees under the new statute. The specific code is provided below:

18-50-118. Recovery of fees.

• (a) A mortgagor may recover reasonable attorney's fees under this subchapter if a court sets aside the statutory foreclosure sale due to a mortgagee’s failure to strictly comply with any provision of § 18-50-101 et seq., under § 18-50-116(d)(2)(B)(ii).
• (b) A mortgagor shall not be awarded attorney's fees under subsection (a) of this section if the:
  1. Mortgagor and mortgagee reach a mutual resolution of the debt and corresponding foreclosure;
  2. Mortgagor files a petition for bankruptcy while the foreclosure or any related litigation is pending;
  3. Mortgagee instituted the statutory foreclosure while in good faith relying on a policy of title insurance that was subsequently found to be in error;
  4. Mortgagee instituted the statutory foreclosure in good faith without knowledge of unrecorded debt on the subject property;
  5. Mortgagee instituted the statutory foreclosure in good faith without knowledge of assessments, taxes, or liens filed against the subject property subsequent to the final policy of title insurance being issued; or
  6. Mortgage is reinstated under § 18-50-114.