If you live in Alabama and are delinquent in your mortgage payments, you should learn about the foreclosure process and your rights. In this article, you’ll learn about each step in an Alabama foreclosure, as well as get useful information about both federal laws and state laws that protect you during the process.
Federal law usually prevents the servicer (on behalf of the foreclosing party, called "lender" in this article) from initiating a foreclosure until the loan obligation is over 120 days delinquent. (12 C.F.R. § 1024.41). (To learn more about the federal law that delays the beginning of a foreclosure for 120 days, see How Soon Can Foreclosure Begin?)
Also, under federal law, servicers are supposed to work with borrowers who are having trouble making their monthly payments in a "loss mitigation" process to try to avoid a foreclosure. (12 C.F.R. § 1024.41).
In Alabama, most foreclosures are nonjudicial under a power of sale in a mortgage, which means the process takes place without court supervision. The lender publishes notice in a newspaper once a week for three consecutive weeks before the sale, but Alabama law doesn’t require that the lender send a notice to the borrower. (Ala. Code § 35-10-13).
But mortgages in Alabama often contractually require the foreclosing party to notify the borrower—usually by mailing a breach letter—about the default and upcoming foreclosure proceedings. Also, if you took out your mortgage loan on or after January 1, 2016, you'll likely receive a notice about your right to redeem (see below) at least 30 days before the foreclosure sale. (If you think you will lose your home to foreclosure, read When Do You Have to Leave Your Home When It’s in Foreclosure?)
Under Alabama law, you don’t get the right to reinstate the mortgage before the sale. But while state law doesn’t provide a right to reinstate, your mortgage contract might give you time to complete a reinstatement.
Some states, including Alabama, have a law that allows a foreclosed homeowner to “redeem” (buy back) the home after the foreclosure sale.
Generally, the redemption period after foreclosure lasts for one year after foreclosure sale. But if the loan originated on or after January 1, 2016, a homestead exemption was claimed in the tax year during which the sale occurred, and proper notice about the right to redeem was given at least 30 days before the foreclosure sale, then the redemption period is 180 days after the sale. If the bank doesn't provide a redemption notice before the sale, the redemption period doesn't start until the bank provides it; however, homeowners can’t redeem, under any circumstances, more than one year after the foreclosure sale. (Ala. Code § 6-5-248(h).)
After a foreclosure sale, you have to surrender the property to the buyer within ten days after a written demand for possession of the property (if the buyer makes such a demand) or you'll lose the right of redemption. (Ala. Code § 6-5-251.)
If the total mortgage debt is more than the foreclosure sale price, the difference is called a “deficiency.” Some states allow the lender to get a personal judgment (called a “deficiency judgment”) against the borrower for this amount.
In Alabama, the lender can sue you after a nonjudicial foreclosure to obtain a deficiency judgment. (To learn more, read Deficiency Judgments After Foreclosure in Alabama.)
You can find Alabama’s foreclosure laws in the Code of Alabama (§§ 35-10-1 to 35-10-30 and §§ 6-5-247 to 6-5-257). To learn how to look up foreclosure laws, see How to Look Up the Foreclosure Laws in Your State.
Federal and state laws establish a structured foreclosure process and timeline. But mistakes that violate the law are common in foreclosures. If you think your lender or servicer broke the law in the foreclosure process or you want to find out about different ways to fight a foreclosure, consider contacting a local foreclosure attorney. It’s also a good idea to contact a HUD-approved housing counselor if you want to learn about different loss mitigation options.