What is an Alabama foreclosure?
Alabama consumers often have questions about foreclosures — in this article we do our best to answer a number of these questions. We will have links to other articles if you want to go deeper on a particular subject.
At any time you can call us at 205-879-2447 to get help with your mortgage issues, especially stopping or reversing a foreclosure.
So let’s get started with these questions. . .
What does a “foreclosure” actually mean?
This is when your mortgage company takes ownership of the property or sells your property to someone else.
So in a normal situation — before foreclosure — you own your property.
But you have a debt — this is the “note” that tells you how much you borrowed and what the terms of repayment are.
Now, this debt is not unsecured — instead, it is secured by your property. This is because you gave the mortgage company a “mortgage” which is the security for your property. It ties — secures — the debt to your property.
What are the steps leading up to a foreclosure?
The first step is you get a default letter. This basically says how you are in default (lack of payment), what you need to do to cure it (fix it), and how long you have (normally 30 days). It must also tell you, if your mortgage requires it, that you have the right to sue before a foreclosure to have a judge look at your situation.
The second step is you get an acceleration letter. This is the letter that says you no longer have 30 years to pay off the note — instead, it is all due now. It has been accelerated. And this will also tell you when the foreclosure is set on your home.
Then the actual sale takes place which we will discuss below.
When does a judge look at the foreclosure to make sure it is legal?
Unless you sue your mortgage company, no judge will look at your foreclosure before it happens.
This comes as a shock to many Alabama homeowners but this is the reality of a non-judicial foreclosure.
How does the actual foreclosure take place?
The foreclosure actually starts at the auction which must take place outside the front entrance to the courthouse in the county where your property is located.
The auctioneer announces the sale and reads it and then the high bidder will be the winner. That leads us to the next step.
When is the foreclosure official?
The foreclosure is final when the foreclosure deed is signed and filed in the probate court.
The foreclosure deed is what transfers ownership from you to the high bidder (normally the mortgage company).
Until it is signed, there is no transfer of ownership.
Do I have to leave my home right after the foreclosure?
It depends on what you want to do.
You will normally get a ten-day “vacate” letter that tells you to leave your home. If you don’t, then you can lose your right of redemption to buy your property back within six months or 12 months.
So if you carefully evaluate your options and decide to leave, you can do that. (And you may be offered “cash for keys” by your mortgage company to leave and release them from all liability for their wrongdoing).
Or you may decide, after careful review, to stay and fight.
What will happen if I do not leave my home?
You can lose your right to redeem.
You can be sued for ejectment. This is where the new “owner” (usually the mortgage company) sued you to evict you — eject you — from your home. They may also sue for money damages for staying in the house that they claim they own).
What are all the ways to stop a foreclosure?
Here are a number of options to stop a foreclosure.
First, you can sue your mortgage company so that a judge will review whether or not a foreclosure should happen.
Second, you can reinstate the loan.
Third, you can file for chapter 13 bankruptcy to be able to make payments into court on the back amount owed (arrearage) and make your current payments directly to your mortgage company.
Finally, you can get loss mitigation which typically is a loan modification or a deed in lieu of foreclosure.
We’ll take a look at these next.
When should I use the extreme option of bankruptcy?
Use this when no other option works for you.
Filing bankrutpcy is a life changing event so it needs to be carefully considered before doing.
Make sure you can afford to make your current payments and the back payments (arrearage). Otherwise, you will have a failed bankruptcy and then a foreclosure on your record.
How about a reinstatement?
If you have the money to pay off the back amount you owe, this can be a great option. So your mortgage company says you owe $7,500 to reinstate the loan. You pay that at the right time, in the right form, and to the right company and the foreclosure must be stopped because you will be current.
There is no right under Alabama law or RESPA (Real Estate Settlement Practices Act) to take your home when you are not behind.
What is the best form of loss mitigation?
It depends — if you want to stay, then a loan modification is the typical solution. This will get you current, often it will lower the interest rate, and it may put the back amount owed into a balloon payment at the end.
But what if you want to leave and not have a foreclosure?
Then you look at a deed in lieu of a foreclosure or a short sale.
There are other forms of loss mitigation — I suggest applying for them all and then see which one works best for you.
How can I sue my mortgage company to stop the foreclosure without filing bankruptcy?
Your mortgage will normally give you the right to sue your mortgage company to have a judge see if the foreclosure should happen.
Normally this will be in paragraph 22 of your mortgage or perhaps paragraph 19. It is mission critical to see what your options are under your mortgage and the law.
This can stop the foreclosure (only moronic companies do a foreclosure when we have sued them before the foreclosure) and give you a chance to work things out and be compensated for any harm the mortgage company caused you.
For most folks, this is the best option. And certainly everyone needs to look at this option and then file the lawsuit in the right court, at the right time, and make the right claims to be successful.
What should I do now?
Here are my suggestions.
Anything you have questions about or want more information on, click on the links as we discuss each item. (You can also call us at 205-879-2447).
Look at each option. We are happy to help you do this so you can decide what is the best option for you. Not for anyone else but for you.
Call us at 205-879-2447 and ask to speak to Randi and she will start the process of gathering the facts so we can help you decide on your best course of action.
Best wishes and talk to you soon!