Foreclosure happens when a lender takes possession of property due to the fact that the owner defaults on their payments. Essentially, the rights to property bought are terminated (such as property bought with a mortgage). Before foreclosure, the lender will notify the owner of default, generally after three months of missed payments. If the property owner has been notified of the lender’s right to repossess the property, and they continue to miss payments or fail to establish a new agreement with the lender, the lender will initiate the foreclosure process.
Statutory redemption refers to a mortgagor’s right to regain ownership of their property that has been foreclosed upon. Statutory redemption laws provide the owner with a limited window in which they may redeem their property, if they are able to pay the amount that the property was sold for at a foreclosure sale. The typical amount of time for this is one year.
Not every state allows for a redemption period. All states allow borrowers to redeem their home BEFORE a foreclosure sale, generally referred to as the equitable right to redemption, but only some provide time AFTER a foreclosure sale. The period after a foreclosure when a mortgagor is allowed to redeem their property, is known as statutory redemption.
- How does the Statutory Redemption Process Work?
- How Long do I Have to Claim Statutory Redemption?
- Can I Stay on the Property During the Redemption Period?
- How is Statutory Redemption Different from Equitable Redemption?
- Should I Hire an Attorney for Help with Foreclosure Statutory Redemption Issues?
It is important to note that the statutory redemption process varies by state, and not all states allow for statutory redemption. As noted above, statutory redemption laws allow a mortgagor an opportunity to make a written demand to both the foreclosure purchaser and the party that held the foreclosure sale.
It allows them to ask them for a list of payments needing to be paid in order to redeem the property from foreclosure. In short, statutory redemption allows a homeowner an opportunity to pay off missed payments, in order to keep their home.
Typically the statutory redemption process begins with the written demand to the purchaser of the home (the party that purchased the home through the foreclosure process) and the party who held the sale (typically the county courthouse in which the property sits). Then the purchaser has a certain period of time to provide an itemized statement of charges due. After that, the original home owner or mortgagor has to pay the full redemption price after filing a claim for statutory redemption.
The redemption price is typically the amount of the foreclosure sale price, plus interest and other expenses, such as HOA fees. Alternatively, the homeowner may pay off the total amount owed on the original mortgage note, plus interests and the cost of the foreclosure process.
However, if the original homeowner does not tender the full redemption price after filing the claim, plus any outstanding interest, then they will forfeit their right to redemption. After the right to redemption is waiver, the original homeowner loses all of their rights in the property and must immediately vacate the property, or face eviction or even risk trespassing charges being filed against them.
Once again, not every state has statutory redemption laws. For those that do have statutory redemption laws, the redemption period varies depending on the state. In the states that allow statutory redemption, the typical redemption period range is generally between 30 days to 1 year after foreclosure.
However, certain factors may increase or decrease the period allowed for statutory redemption. For example, the redemption period may vary depending on various factors such as:
- Whether the foreclosure was judicial or nonjudicial;
- Whether the foreclosing party purchased the home at foreclosure;
- Whether the property was abandoned; or
- Whether the homeowner waived their right to redemption in the loan documents.
One benefit of statutory redemption, is that the original mortgagor of the property is given more time to gather the money necessary to redeem the property. Sometimes, state law even gives the foreclosed borrowers the right to live on the property during the pendency of the foreclosure process and redemption period.
However, if the mortgagor is unable to pay the full statutory redemption price before the allowed statutory redemption time period expires, then they will lose all their rights to be present on the property and will be considered a holdout or trespasser. Failure to vacate a premises in such cases may lead to other legal issues, such as trespassing or eviction, and result in the borrower being liable to pay a fair market value of rent and additional fees. It is important to consult your local state laws before continuing to reside in your property after foreclosure.
There are many differences between equitable redemption and statutory redemption. The two most important differences are that equitable redemption occurs before a foreclosure sale, and a person cannot waive their right to equitable redemption. Further, every state offers the equitable right of redemption, whereas the statutory right of redemption is only offered in about half of the United States.
Under the equitable right of redemption, a homeowner being foreclosed upon has a right to redeem the property by making their late mortgage payments, plus any interests. They can do this to save their homes from being foreclosed upon. In the event that a missed payment triggered an acceleration clause in the loan contract, some states allow the mortgagor to pay a specific amount of money to redeem their home. However, other states make the mortgagor pay the entire mortgage balance.
Thus, it is very important to review any loan documents, so that you understand if there is an acceleration clause present, that allows the lender to demand full payment of the mortgage upon a missed payment.
As can be seen, foreclosure is often a difficult and complex process, and the foreclosure process varies by state. Therefore, if you find yourself in a situation where your property has been or is going to be foreclosed upon, you should immediately consult with a well qualified and experienced real estate attorney.
An experienced real estate attorney in your area can help you determine whether statutory redemption is allowed in your state, guide you through the process for making a claim, and even represent you in court if necessary.