Redemption of Foreclosure
Foreclosure terminates the rights of a property owner or mortgagor who defaults on a loan that is secured by the property. Foreclosure redemption laws vary by state; not every state allows the mortgagor to redeem a foreclosed property. The availability of redemption may also vary based on the type of foreclosure process involved.
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Foreclosure Redemption Definition
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Foreclosure redemption is the period of time that a mortgagor may reclaim property after a foreclosure sale. State statute dictates the availability of redemption, the redemption period and the costs involved in reclaiming the property. The right of redemption is different from the right of reinstatement in every state. The right of reinstatement is when the mortgagor pays the outstanding unpaid loan payments and associated fees prior to a foreclosure sale.
Types of Foreclosure
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In many states, foreclosure redemption rights vary based on the type of foreclosure involved, either judicial or non-judicial. Judicial foreclosures are processed through the local court system and have the greatest possibility of redemption rights. Non-judicial foreclosures result from a clause in the mortgage deed giving the lender all rights to terminate property ownership after a default without the necessity of court procedures. Even in states with redemption rights, non-judicial foreclosures may eliminate the right of redemption.
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Redemption Time-Frame
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The time frame for redeeming a foreclosed property after a foreclosure sale ranges by state from zero to 365 days. In three states, Maryland, Connecticut and Utah, the court decides whether or not foreclosure redemption is applicable and the length of time for a foreclosure redemption. As of January 2011, 25 states do not have statutes providing for foreclosure redemption. Mortgagors facing foreclosure should consult their state laws to determine whether or not redemption is a possibility. The redemption time frame also affects those who purchase foreclosed properties. As long as redemption rights are available, ownership is tenuous.
Foreclosure Redemption Process
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If foreclosure redemption is applicable, the foreclosed homeowner must pay the outstanding balance on the mortgage, in some cases, as well as any and all costs incurred during the foreclosure process before reclaiming the property. Depending on state statutes, redeeming the property may not require paying off the outstanding mortgage balance. The price of redemption may be the sales price of the property at auction. Court costs and attorney's fees can increase the total amount due by thousands of dollars.
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