“Statutory redemption” refers to a mortgagor’s right to regain their ownership of property that has been foreclosed. Statutory redemption laws allow the borrower a limited amount of time (usually one year) to redeem their property if they are able to pay the amount that the property was sold for at a foreclosure sale.
Statutory redemption laws serve a few very important purposes. First, they give the mortgagor a valid chance to regain their property after foreclosure has been executed. Also, statutory redemption helps to prevent extremely low sales prices, thus helping to prevent fraud and other unfair business practices.
Other parties such as junior mortgage holders can also be granted the right of statutory redemption.
How Does the Statutory Redemption Process Work?
Statutory procedures for statutory redemption vary by state, but the process begins when the original homeowner makes a written demand to the purchaser of the property that was foreclosed for a statement of the charges required to redeem the property. The purchaser (the party who bought the property at the foreclosure sale or through the bank) has around 10 days to send an itemized statement of charges. The original homeowner then has to pay the redemption price after filing a claim.
If the original homeowner does not ay the redemption price after filing a claim, then they forfeit the property. The purchaser then will acquire title, all rights and interest in the property. If the homeowner is still in possession of the property, they must then evacuate the home or face eviction and even trespassing charges.
How Long do I Have to Claim Statutory Redemption?
First of all, not all states have statutory redemption laws. Only about half of the 50 states have some form of statutory redemption law. In states that do allow statutory redemption, the time period allotted may differ widely according to region.
Most states allow statutory redemption to occur within 6 months to 1 year after foreclosure. Other states such as Illinois only allow redemption prior to the close of a foreclosure sale. In order to redeem their property, the mortgagor must be able to pay the following within the allotted statutory time period:
- The entire foreclosure sale price, and
- Any interest rates as defined by statutes
Am I Allowed to Stay on the Property During the Statutory Redemption Period?
Yes- in states that allow statutory redemption, the mortgagor may remain on the premises after foreclosure. However, they may only stay on the property during the statutory redemption time frame.
If the statutory redemption time period expires and the mortgagor is unable to pay, then the purchaser at the foreclosure sale acquires all title, rights and interest in the property. Failure to evacuate the premises in such cases may lead to other legal issues, such as trespassing or eviction.
Is Statutory Redemption Different from Equitable Redemption?
Yes, statutory redemption and equitable redemption are much different:
Equitable Redemption: Under the right of redemption, a homeowner in a foreclosure process has the right to redeem the mortgage and keep the house by making mortgage payments or paying a certain amount of the money to save their homes from being foreclosed. Equitable foreclosure occurs prior to the home actually being foreclosed. The homeowner only needs to pay the amount that is due and not the entire mortgage balance.
Statutory Redemption: If the state provides statutory redemption rights, then the homeowner has the right to redeem their mortgage for a certain period of time by paying the entire foreclosure sale, plus interest and other fees to the purchaser of the foreclosure sale. Statutory redemption occurs after the property is actually sold in foreclosure and the homeowner must pay the entire mortgage balance.
Every state allows for the equitable right of redemption before foreclosure. As mentioned, statutory redemption is only available in about half the U.S. states.
Do I Need a Lawyer for Statutory Redemption of Foreclosed Property?
Foreclosure can sometimes be a difficult and complex process. If your property has been or is going to be foreclosed, you may wish to contact a real estate lawyer for advice. An experienced attorney can help you determine whether statutory redemption is allowed in your state. If so, your lawyer will be able to guide you through the redemption process so that you can reclaim your property after foreclosure.