Foreclosure & Alternatives Law
Foreclosure Laws in Alabama
Alabama is a non-judicial foreclosure state, which means that a mortgage holder doesn't have to take the homeowner to court to reclaim the home if the mortgage falls behind. There are still steps the mortgage holder has to take to foreclose on the home.
Stages of Foreclosure in Alabama
There are three stages to a foreclosure in Alabama. The first stage is what happens before the home is put up for sale. The second is what happens after the home is sold. The third occurs only if the person who lost the home doesn't move out after the home is sold.
The first thing that has to happen when a homeowner defaults on the mortgage is that a default letter has to be sent to the homeowner. That has to include a time limit for curing the default, which is usually 30 days. It also has to include how to cure the default and what is included in the default. In most cases, the foreclosure sale can occur 30 days after the default letter is served.
If the default isn't cured by the time limit on the default letter, an acceleration letter is sent. This letter states that the balance of the loan, not just the past due balance, is due immediately. It includes the date that the home will be sold at auction, as well as the location of the sale.
In Alabama, a notice has to be placed in the newspaper for three consecutive weeks prior to the sale. It must be placed in the local newspaper in the county in which the home is located.
While the foreclosure is still in this stage, it is usually possible for homeowners to work out a deal with the mortgage company. This can mean getting a loan modification, having the loan reinstated, or getting a new loan. Some homeowners might opt to file bankruptcy to keep their home, which might be possible while in this stage of foreclosure.
If a homeowner is unable to cure the default to the satisfaction of the mortgage holder, the sale on the home can proceed. An important point here is that the sale must take place at the place noted in the newspaper ads on the date specified. If the sale occurs anywhere else or at any other time, the sale is an illegal sale.
When the sale on the foreclosed home goes through in a legal manner, the new owner of the home can send a letter to the former homeowner giving 10 days to move out. This brings up a choice. The person who lost the home can choose to ignore the eviction notice and remain in the home or the person can move out within the specified time.
Choosing to stay in the home and ignoring the eviction notice means the former owner can stay in the home while the new owner goes through the court process to forcibly remove him or her. In this case, the former owner gives up the one year redemption period that Alabama allows.
Leaving the home prior to the end of the 10 day period enables the former owner to have the benefit of the redemption period. This is a one year period in which the former owner can reclaim the property by paying the required redemption amount and filling out the appropriate forms.
When people don't move out of a home they lost to a foreclosure within the time specified by the mailed notice sent from the new owner, the new owner can go to court to have them forcibly removed. This is called the ejectment lawsuit. If the new owner opts to do this, the former owner will have 30 days to answer the lawsuit. Some people choose to answer the lawsuit to try to fight the eviction. Others choose to ignore the lawsuit. In that case, a default judgment is issued.
If the judge rules in the new owner's favor, the court will order the eviction. That would mean the former owner would have to move immediately.
With the short time span from missing a mortgage payment to the home being sold at an auction, it is vital for Alabama homeowners who are facing foreclosure to take swift action. This means learning the options available and choosing the one that best fits the situation.