Alabama Foreclosure Laws

Foreclosure laws are the legal procedures by which a lender repossesses collateral for a loan which is in default. These laws are normally applied when one fails to meet repayment for a mortgage. The lender therefore obtains legal right to sell off the property due to non payment by the owner.

Alabama is a title theory state where the property is held in trust until full payment is made. A mortgage document or a deed of trust is used to secure title to a property.

Non judicial foreclosure

The primary method used for foreclosure in this state is known as non-judicial foreclosure. The mortgage document contains a power of sale clause which allows an attorney to foreclose a property in order to meet the underlying mortgage repayment that is in default. The sheriff is then allowed to auction the property. When dealing with a non judicial foreclosure, very strict notice requirements and legal documents that contain the power of sale language are required.

The notice requirements are:

• · The notice of sale indicating a pending foreclosure must be obtained by the attorney handling the foreclosure. The lender then publishes a notice of foreclosure date for 3 consecutive weeks in a local newspaper that circulated in the county where the property is located.
• · The owner/borrower is allowed to a make full payment of all outstanding mortgage premiums and all other legal fees and charges and therefore stop the foreclosure.
• · The property is then auctioned to the highest bidder. Auctions normally happen between 11am to 4pm. The sheriff reserves the right to postpone the auction for valid reasons that may arise.

Judicial foreclosure

This state also allows for a judicial foreclosure where a ruling of foreclosure must be obtained from a judge. The attorney dealing with the foreclosure files a lis pendens document with the court. This is a public notice document that indicates that a property has a suit pending on it.

Notice of Sale

The notice of sale must be published for 3 weeks in a local newspaper and be posted on the doors of the court. It must also appear in 3 other public places. Any other notice of sale agreements stipulated in the mortgage must be followed by the lender.

Process period

A non-judicial foreclosure that is not contested takes 60-90 days to effect depending on the time taken to process the required notices. This process may take longer if the borrower contests the action in court seeking adjournment of auction or files for bankruptcy.

Redemption

The state of Alabama provided for a statutory right of redemption giving the owner/borrower the right to reclaim the property within twelve months from the date of auction by repaying all outstanding mortgage premiums and any other fees and charges that have been incurred in the foreclosure.

Deficiency judgment

The state of Alabama allows for the court to issue a deficiency judgment when property is sold for less that the loan amount secured by the mortgage. The lender can therefore require the borrower to pay the other outstanding amount that was not covered by the foreclosure auction.

Foreclosure laws may change from time to time. It is therefore important to seek advice from a qualified attorney as a borrower or lender to ensure that you obtain up to date details on the laws of foreclosure in any state.