Foreclosure is a type of legal process wherein a lender (e.g., a bank) will be permitted to take possession of a home when the homeowner (e.g., a borrower) has failed to keep up with their mortgage payments. After a number of missed payments, the lender will legally be allowed to seize the home from the homeowner and can sell it to recover the remaining balance owed on the mortgage.
Fortunately, homeowners do have some forms of protection they can use against a foreclosure proceeding. One such form of protection is known as a statutory right of redemption.
A statutory right of redemption refers to a homeowner’s right to regain ownership of their property by paying off their mortgage loan within a set period of time (usually around one year). However, this right only applies after the final foreclosure sale occurs and is not available in every state.
Homeowners who live in states that have statutory redemption statutes must be able to pay the exact amount of what the property was sold for at the final foreclosure sale within a year, or else the lender can re-seize it and sell it to another party. Thus, if you are in danger of losing your property to a foreclosure sale, then you should speak to a local real estate lawyer immediately.
How Does the Statutory Redemption Process Work?
As previously mentioned, it is important to keep in mind that the process for statutory redemption after foreclosure is not available in every state. Also, states that do allow the process to proceed will have requirements that vary widely from one another.
In general, the statutory redemption process typically begins with the original homeowner sending a written demand letter to the party who purchased the home at the final foreclosure sale. A letter is also sent to the party who was responsible for overseeing the foreclosure process (e.g., usually the county courthouse in the jurisdiction where the property is located).
The demand letter should include a request for the list of payments that must be received in order to redeem the property from foreclosure. After the letter is received, the latest purchaser will have a certain period of time to respond to the letter by providing an itemized statement of charges.
Once this statement is received, the original homeowner will need to file a claim for statutory redemption. After filing this claim, they will then have to pay the full redemption price, which normally includes the price of the property at the foreclosure sale, plus interest and any other expenses (e.g., Homeowner’s Association (“HOA”) fees).
In some cases, a homeowner may pay off the total amount owed on the original mortgage note, plus interests and the costs associated with the foreclosure process instead. However, if the original homeowner fails to tender the full redemption price of the home after filing a claim for statutory redemption along with any outstanding fees or interest, then they will most likely forfeit their right to redeem the property.
When a homeowner forfeits their right to redeem the property, they are considered to have waived their right of statutory redemption. Once this right is waived, the original homeowner will lose all of their rights to the property. They must immediately vacate the home, or else they risk having eviction or possibly even trespassing charges filed against them in court.
How Long Do I Have to Claim Statutory Redemption?
As discussed above, not every state recognizes statutory redemption rights. For states that have enacted such laws, the length of the redemption period will largely depend on the state. The typical redemption period in most states that have statutory redemption laws usually ranges anywhere between thirty days to one year after the final foreclosure sale.
There are certain factors, however, that may increase or decrease the amount of time that a homeowner has to exercise their right of statutory redemption. Some common examples of factors that may affect the length of a statutory redemption period include:
- The type of foreclosure sale that occurred (e.g., judicial vs. nonjudicial foreclosure sale);
- Whether the foreclosing party purchased the property during the foreclosure process;
- Whether the homeowner waived their right to exercise statutory redemption in the loan documents; and/or
- Whether the homeowner abandoned the property.
Can I Stay on the Property During the Redemption Period?
One of the greatest benefits to statutory redemption rights is that they give the homeowner (i.e., the original mortgagor of the property) additional time to gather the necessary amount of funds required to redeem the property. In some states, a homeowner may even be allowed to live on the property while the foreclosure process is still pending and throughout the redemption period.
If a homeowner is unable to pay the full amount of the statutory redemption price before the mandated statutory redemption period expires, then they will forfeit their right to redemption, lose any rights they have in the property, and will be considered to be a squatter or trespasser in the eyes of the law.
Aside from possibly facing the above-mentioned charges for trespassing or eviction, remaining on the property after the period has expired can also result in the homeowner being forced to pay the fair market value of rent and other miscellaneous fees.
To be sure that a homeowner can remain on the property during the redemption period, it is best if they review the laws in their state and consult a local real estate lawyer for further legal advice.
How is Statutory Redemption Different from Equitable Redemption?
There are a number of important differences between the statutory right of redemption and the equitable right of redemption, and how they apply to foreclosure sales. For one, unlike a statutory right of redemption, the equitable right of redemption is available in every state. A person also cannot waive their right to equitable redemption like they can for statutory redemption.
Another difference between the two is that the equitable right of redemption must be exercised prior to the final foreclosure sale, whereas a claim for statutory right of redemption cannot be raised until after the final foreclosure sale occurs.
Additionally, a homeowner whose property is in the process of being foreclosed upon will have the right to redeem the property by making late mortgage payments plus interest under the equitable right of redemption. This can prevent the foreclosure sale from happening.
With a statutory right of redemption, however, a homeowner will only be allowed to pay the full amount of their home to redeem it after the foreclosure sale has already occurred. In other words, there is no way to prevent foreclosure using a statutory right of redemption.
Should I Hire an Attorney for Help with Foreclosure Statutory Redemption Issues?
In general, the foreclosure process can often be a challenging and complex process. Each state has its own requirements for foreclosure and not every state provides a statutory right of redemption. Therefore, if you are a homeowner and your house has been or is about to be foreclosed on, then you should contact a local foreclosure lawyers for assistance immediately.
An experienced real estate lawyer can find out whether you can claim a statutory right of redemption, and if so, can help you navigate the process for filing such a claim. Your lawyer can also inform you of other legal rights you may have to protect you against foreclosure and can determine whether there are any ways to prevent a foreclosure sale from happening.
Additionally, your lawyer can ensure that your rights are protected throughout an entire foreclosure proceeding and can provide representation in court if necessary.