Does Arizona Law Allow a Redemption Period After a Foreclosure?
In short, yes. Arizona law allows the borrower a set amount of time after the foreclosure sale to redeem the property if the property foreclosure occurred through the judicial system and the borrower did not abandon the property before the foreclosure.
If you meet these conditions, then you have six months from the date of the foreclosure sale to pay all outstanding loan amounts, fees, and costs to redeem the property. However, if the foreclosure occurs out of court, in a nonjudicial foreclosure, then you do not have the right to redeem the property.
What Is a Redemption Period?
A redemption period refers to the window of time in which a borrower can reclaim their foreclosed property by paying off what they owe on the loan and any other delinquent debt attached under the loan agreement.
In Arizona, only properties that went through the judicial foreclosure process are eligible for a redemption period.
Before and After the Foreclosure Sale
Prior to a foreclosure sale, you’ll have the chance to reinstate the mortgage by paying off all missed payments, interest, and fees. This effectively ends foreclosure proceedings, at least for the time being.
After a foreclosure sale takes place, things might get a little more difficult. For a nonjudicial foreclosure, you won’t have an opportunity to redeem the property — the sale is considered final. If the foreclosure went through the courts, however (a judicial foreclosure), you have six months to pay all amounts you owe to redeem the lending agreement. If you abandoned the property, this redemption period shrinks to just 30 days after the sale date.
Reinstatement vs. Redemption
Many people confuse reinstatement of a loan with redemption. Reinstatement refers to paying off late debt only, while redemption of a loan requires payment of the principal in full, in addition to all delinquent debt. That means you don’t just have to catch up on late payments; you must pay your mortgage in full.
To redeem your foreclosed property, you’ll need to pay the buyers in full plus 8% interest, plus any taxes or assessment fees attached to the property. Redemption can be a much more difficult and costly process as opposed to reinstatement, so when facing foreclosure, it’s important to consult an experienced attorney as early as possible.
Foreclosure Process in Arizona
Most foreclosures are nonjudicial and do not involve the courts. In these cases, a 90-day notice period begins as soon as the lender informs the borrower that the foreclosure process is beginning via a Notice of Sale.
While a demand letter is not legally required, your lender may send this document after you’ve missed a couple of payments, if not sooner. The lender will also send a Statement of Breach with the Notice of Sale by certified mail. This might occur twice, within a five-day period as well as a 30-day period, though they can send the letters at the same time.
The sale of the foreclosed property is advertised in the local newspaper, at the courthouse, and at the foreclosed property for four weeks. The sale can proceed when all the documentation has been filed, all the parties have been notified, and all the procedures have been followed.
The borrower has until 5 p.m. of the business day preceding the sale to reinstate the loan. Following the foreclosure sale, a redemption period may or may not apply.
Can You Stop a Foreclosure?
You can stop foreclosure in Arizona by reinstating the loan (that is, paying all outstanding debt and resuming the mortgage schedule as initially laid out) during the earliest days of the process.
You can also file bankruptcy and freeze foreclosure proceedings for a period of time, giving you time to either collect the assets necessary to restructure your debts or find an attorney to contest the foreclosure.