A borrower in Arkansas executed a deed of trust to secure a $200,000 loan. The borrower later defaulted, and the trustee conducted a non-judicial foreclosure sale. The property sold for $185,000 at the trustee's sale. The lender is now considering whether to pursue additional remedies. Simultaneously, the borrower claims the property was his urban homestead located on a 1/4-acre lot. Which combination of legal outcomes is most accurate under Arkansas law?
Correct Answer
B) The lender may pursue a deficiency judgment for $15,000, and the homestead exemption does not prevent foreclosure on a validly executed deed of trust securing a purchase money loan
Under Arkansas law, two separate legal principles apply here. First, the lender may pursue a deficiency judgment for the $15,000 shortfall ($200,000 loan minus $185,000 sale proceeds) through a separate court action, as Arkansas generally permits deficiency judgments after non-judicial deed of trust foreclosures. Second, the Arkansas homestead exemption (Ark. Const. Art. 9) protects homesteads from most judgment creditors but does NOT prevent foreclosure under a validly executed deed of trust, particularly a purchase money deed of trust. The borrower's voluntary execution of the deed of trust constitutes a waiver of homestead protection against that specific lien.
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Related Concepts
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
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