05 Jun Arkansas Legislative Update
The Arkansas legislature recently amended its laws governing the calculation of interest on consumer loans and also amended the Fair Mortgage Lending Act (the “Act”). The legislature also enacted legislation allowing scrivener’s affidavits to correct errors in instruments affecting real property. All the legislation discussed in this memorandum is effective July 16, 2013.
ARKANSAS HOUSE BILL 1748
In calculating interest for a partial payment that is made on a consumer loan, the interest must be calculated to the time when the partial payment was made, and the partial payment must first be applied to the payment of the interest. If the partial payment exceeds the interest due on a consumer loan, the balance of the partial payment must be applied to reduce the principal of the debt. This method of calculating interest and applying payments will apply to all subsequent payments. Interest must not be added to the balance of a consumer loan if a payment falls short of paying the interest due.
The above provisions do not apply to commercial credit, including, without limitation, commercial real estate financing transactions.
“Consumer loan” means an extension of credit for personal, family, or household purposes but does not include credit card debt, open account debt, or installment loans.
ARKANSAS SENATE BILL 871
An operating subsidiary of a state chartered bank regulated by the State Bank Department is exempt from licensure under the Act (previously exempted operating subsidiaries of a state or federally chartered bank, a savings bank, a savings and loan association, or a credit union). Additionally, an attorney licensed in Arkansas rendering legal services to his or her client, when the conduct that would subject the attorney to the Act is secondary to the provision of the legal services offered is exempt from licensure under the Act.
The definition of a “loan officer” now includes an individual who in exchange for compensation as an employee of or who otherwise receives compensation or payment from a mortgage broker or a mortgage banker provides or offers modification of a mortgage loan.
A “mortgage servicer” now includes a person that has the right to receive from or on behalf of a borrower:
- Funds or credits in payment for a mortgage loan; or
- The taxes or insurance associated with a mortgage loan.
It is unlawful for any person in the course of any mortgage loan transaction or activity:
- To fail to make payments in a timely manner from an escrow account held for the borrower to pay insurance, taxes, and other charges concerning the mortgage property without good cause, and the failure to pay results in late penalties or other negative activity;
- To place hazard, homeowners, or flood insurance on a mortgaged property:
- Without providing prior written notice to the borrower;
- If the mortgage servicer knows or has reason to know that adequate insurance coverage already exists; or
- In an amount that unreasonably exceeds the value of the insurable improvements or the last-known coverage amount or policy limits of insurance; or
- To fail to refund to the borrower unearned premiums paid by or charged to a borrower for hazard, homeowners, or flood insurance placed by a mortgage banker or mortgage servicer if reasonable proof is available or provided that the borrower had or obtained coverage in effect resulting in the unnecessary placement of forced insurance. The borrower must receive a refund of excess premium funds taken from the borrower when reasonable proof is provided within 12 months of the forced placement.
ARKANSAS SENATE BILL 1137
“Scrivener’s affidavit” means a sworn and acknowledged affidavit relating to:
- The identification, marital status, heirship, relation, death, or the time of death of a person who is a party to an instrument affecting the title to real property;
- The identification of a corporation or other legal entity that is a party to an instrument affecting the title to real property; or
- The legal description to real property.
A scrivener’s affidavit may be executed and recorded by a:
- Licensed attorney who prepared the original instrument;
- Licensed attorney who represents a party to the original instrument;
- Party to the original instrument if the party prepared the original instrument; or
- Current employee of a title company that completed the form of the original instrument.
A scrivener’s affidavit must:
- Be sworn to and acknowledged before a person authorized to administer an oath under the laws of Arkansas;
- Conspicuously identify in its title that it is a “Scrivener’s Affidavit”; and
- Contain the following information concerning the original instrument:
- The name of the person or entity that completed or prepared the original instrument;
- The names of all parties to the original instrument;
- The recording information, including the recording date of the original instrument; and
- A brief description of each error that the scrivener’s affidavit is deemed to correct.
A scrivener’s affidavit may be prepared in substantially the following form:
Scrivener’s Error Affidavit
KNOW ALL PERSONS BY THESE PRESENTS that:
___________________ [Name] prepared or completed the form of ________________ [Type of instrument] with regard to a conveyance from __________________ [Name(s)] as _______________ [grantor, mortgagor, etc.] to _______________ [Name(s)] as ________________ [grantee, mortgagee, etc.]. The __________________ [Type of instrument] which was recorded in the records of _______________ County, Arkansas, on _________________ [Date], as Instrument Number ____________ [in Book ________ at Page ______] contained a scrivener’s error with regard to the _________________________________________________________________ [reason for correction(s)].
The aforementioned ______________________ [Type of instrument] should reflect that the _______________________ [Type of instrument] read as follows:
_______________________________________________________________________ [Insert correction(s)].
Further affiant sayeth naught.
WITNESS my hand and seal on this _____ day of ________, 20__.
Name printed: ____________________
STATE OF _______________}
COUNTY OF _______________}ss
Sworn to and subscribed before me on the _______ day of ___________, 20__.
My commission expires: ________________
A scrivener’s affidavit that complies with the above form or in a custom form will be:
· Recorded by the county recorder in the land records of the county where the real property is located;
· Indexed by the county recorder in the general index under the names of the original parties to the instrument as they are identified in the scrivener’s affidavit; and
· Admissible as evidence to the same extent as a recorded deed or other instrument in an action involving the instrument to which it relates or the title to the real property affected by the instrument.
Notice of the corrective information provided by the scrivener’s affidavit is effective at the time the original instrument being corrected was recorded. However, if an error contained in a scrivener’s affidavit is of an obvious nature, notice of the corrective information provided by the scrivener’s affidavit is effective at the time the original instrument being corrected was recorded. Notice of the obvious error does not apply to a bona fide purchaser for value of real property.