Foreclosure is a legal process that begins when borrowers fail to meet their mortgage payments and other obligations for money they have borrowed. The formal foreclosure process, which includes the filing of a Notice Of Default, is a legal tool used by lenders to recover lending losses by accelerating payment terms of a non-performing mortgage loan.
Depending on the jurisdiction or state, a foreclosure will be either judicial or nonjudicial. Each state allows for a judicial foreclosure; however, not every state offers a nonjudicial option for foreclosure.
- Judicial Foreclosure is when a lender must seek relief through a judgment issued by the court system.
- Nonjudicial Foreclosure – this is when a lender can seek relief outside the court system using a foreclosure trustee. Nonjudicial foreclosures typically are done in states where a Deed of Trust is used to collateralize the property rather than a mortgage.
Both types of legal processes offer a bit of time between your notification of the foreclosure and the date of the actual sale.
When the foreclosing lender engages the legal system, the foreclosure clock begins. This timer will not stop until the subject property has been sold or the foreclosure is redeemed.
What Does Redemption Mean On A Mortgage?
The right to repurchase a foreclosed home is called redemption. The time in which one can redeem a mortgage loan is known as the Statutory Redemption Period. As its name suggests, these rules are set forth by state statutes.
Note that every mortgagor (a.k.a. borrower) has the statutory right of redemption. This statutory redemption legislation offers borrowers a defined amount of time – after a foreclosure - in which they have the potential to reclaim the property in question.
In other words, the Statutory Redemption Period is the limited (and state-defined) time period that offers borrowers time to find the money they need to keep from losing their home in a foreclosure proceeding.
Borrowers/mortgagors who want to redeem their foreclosed property can do so by –
- Agreeing to pay the foreclosure sale price
- And in some instances, the redemption may require the entire amount owed to the lender, including legal fees and other costs.
Statutory Redemption Laws Differ In Each State
Statutory redemption periods vary by state. Some states offer no legislation at all. If a foreclosure redemption is available, the redemption periods typically range from 30 days to some states that offer up to one year. Note that certain states provide borrowers facing an active foreclosure with the right to remain in their homes during the state-defined redemption period.
Often – although not always, the credit report of the foreclosed borrowers will note the account has been a redeemed foreclosure.
What Does It Mean To Redeem The Property?
After a home has been foreclosed, the process of foreclosure eventually concludes with a foreclosure sale. The only way for a borrower or mortgagor to halt active foreclosure proceedings is to take advantage of the process called redemption.
Any mortgagor who wants to take advantage of this foreclosure avoidance option must settle the mortgage outstanding balance within the statutory rights period. The bad news is if you miss this period defined by the redemption statutes, the property will likely be sold at a foreclosure auction and may become out of reach.
The good news is that no sale can occur once the mortgagor/borrower exercises his right to redemption. Take note that there may be no available post sale redemption period, so it is important to act quickly and decisively.
Redeeming Your Home After Foreclosure
A lender can initiate the legal process known as foreclosure. The borrower has one final opportunity to stop the foreclosure proceedings and prevent the sale at a public auction – the foreclosure redeemed option.
Most lenders require that the foreclosed home owner provide written notice if they plan to redeem the total amount owed. Next, they must remit the funds to the party officially owning the subject property. State law determines the legal processes for these redemption rights. A qualified attorney is quite helpful in these circumstances.
Does a Foreclosure Appear On My Credit Report
Often – although not always, the credit report belonging to the foreclosed borrowers will notate the mortgage loan account in a foreclosure redeemed status. This notation may make getting approved for the best loan rates challenging. Sometimes its presence on the credit report may lead to loan declinations.
How Long Does A State of Foreclosure Redeemed Stay on a Credit Profile?
Redeeming a foreclosure will negatively impact one’s credit but only remain on the report for seven years. Note that –
- A redeemed foreclosure on a credit profile is not as damaging as a foreclosure that completes the process through a public auction. But, without a doubt, it is better to avoid both, if possible.
- As time passes, the impact of negative credit on your credit score begins to diminish. A negative event that happened six years ago will have less of an impact on your current credit score.
How To Dispute A Foreclosure Redeemed
If you find a mortgage loan appearing on your report as a foreclosure and this is not accurate, you can dispute this reporting error.
Before contacting the credit bureau, gather the information you need to demonstrate the information on your credit report is inaccurate. Then submit this evidence (which may include loan documents). Also request that the credit bureau remove the erroneous data that does not reflect the quality of current creditworthiness.
If the credit repository fails to solve the dispute, you may need to consult with an experienced attorney. The Fair Consumer Reporting Act denotes the requirements for these processes.
FAQS - What Does Foreclosure Redeemed Mean?
How To Get A Foreclosure Removed From Your Credit Report?
The three credit repositories’ websites offer links to easily dispute inaccurate information appearing on a credit report.
Remember each of these credit bureaus has up to 30 days to investigate your claim.
Can A Property Be Foreclosed For Delinquent Property Taxes?
Yes. Even if you have had no late mortgage payments, a foreclosure sale can occur from delinquent property taxes. In the case of condominiums, unpaid homeowner association fees can also result in a foreclosure action and sale.
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Written by Allen Lee
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