Through the Mortgage Assistance Alabama program, eligible homeowners in Alabama who have suffered financial difficulty due to the pandemic can receive a portion of the nearly $125 million granted to the state from the federal Homeowner Assistance Fund—up to $50,000 per household. This program uses federal funds to assist Alabama homeowners with past-due mortgage payments and other housing-related expenses.
COVID-19 forbearance is also available to homeowners with a federally backed mortgage loan. If the COVID situation has financially harmed you, your servicer may offer forbearance or another kind of relief, such as a loan modification, even if your loan isn’t government-supported.
If you miss a payment on your Alabama mortgage, the servicer (on behalf of the loan owner, referred to as the “lender” in this article) will start the foreclosure process. Non-judicial foreclosures are most likely, but judicial foreclosures are nevertheless possible. Non-judicial methods are governed by Alabama law, and both federal and state laws provide you with rights and safeguards throughout the foreclosure process.
Alabama Mortgage Loans
You’ll probably sign two documents if you acquire a loan to buy residential real estate in Alabama: a promissory note and a mortgage. The promissory note is a legal document that includes your pledge to repay the debt as well as the terms of repayment. A power of sale clause will almost certainly be included in the mortgage, which provides the lender a security interest in the property. If you default on your payments, the power of sale clause gives your lender the authority to sell your house without a court order to reclaim the money you owe them.
What Happens If You Don’t Pay Your Mortgage?
After the grace period expires, the servicer might charge you a late fee if you skip a payment. Most mortgage loans, for example, give you a 10 to a fifteen-day grace period before you’re charged late fees. Review your promissory note or monthly billing statement to determine the grace period and amount of the late monthly charge in your scenario.
If you miss a few mortgage payments, the servicer will most likely send you letters and make phone calls to collect. Federal mortgage servicing laws require the servicer to contact you (or attempt to contact you) by phone no later than 36 days after a missed payment to discuss foreclosure alternatives, also known as “loss mitigation” options, and to contact you again within 36 days after each subsequent missed payment. The servicer shall notify you in writing after 45 days of a missing payment about possible loss mitigation measures and assign staff to assist you. Some of these obligations are exempted, such as if you declare bankruptcy or notify the servicer not to contact you under the Fair Debt Collection Practices Act.
What Is a Breach Letter and What Does It Mean?
If you fall behind on your payments, many mortgages in Alabama have a provision that requires the lender to issue you a breach letter. This notice informs you that your loan has gone into default. If you do not correct the default, the lender might call the loan due and proceed with the foreclosure.
When do Do Foreclosure Proceedings begin?
Before beginning a foreclosure, the servicer is required by federal law to wait until the loan has been late for more than 120 days. However, in some circumstances, such as if you break a due-on-sale clause or if the servicer joins a superior or subordinate lienholder’s foreclosure action, the foreclosure can start sooner.
Alabama’s State Laws on Foreclosure
The majority of foreclosures in Alabama are non-judicial.
Notification of Foreclosure
The lender in Alabama is required to publish notice of the foreclosure sale in the newspaper for three weeks before the sale.
While Alabama law does not compel the lender to give you notice of the foreclosure in person or by mail, many mortgages contractually require the lender to issue a breach letter, as mentioned above. If you got your mortgage on or after January 1, 2016, you’d almost certainly get a notice regarding your right to redeem (see below) at least 30 days before the foreclosure sale.
Deficiency Judgments in Alabama Following the Sale
When a home is sold in a foreclosure auction, the proceeds may not be sufficient to cover the total amount owed on loan. A “deficiency balance” is the difference between the sale price and the total debt. Many states, including Alabama, allow the lender to obtain a personal judgment, sometimes known as a “deficiency judgment,” against the borrower for this amount.
If you lose your house to foreclosure in Alabama, the lender may sue you for a deficiency judgment after the foreclosure. Once the lender receives a deficiency judgment, it may attempt to collect by garnishing your wages or levying your bank account.
After a Foreclosure Sale in Alabama, there is a Redemption Period.
Some states have laws that allow a foreclosed homeowner to redeem their home after the foreclosure sale. After a foreclosure sale in Alabama, homeowners typically have one year to save their property.
If you took out the mortgage on or after January 1, 2016, Alabama law allows you to redeem your home within 180 days of the foreclosure sale. This law applies to residential properties sold during the tax year in which a homestead exemption was claimed. At least 30 days before the foreclosure sale, the lender must mail you a notification outlining your right to redeem the property. If the lender fails to submit the notice before the sale, you have 180 days from the date of the notification to save the homestead property. However, a right of redemption may not be exercised more than one year after the foreclosure date.
For non-homestead properties, the redemption time is one year from the foreclosure sale date.
Your Redemption Rights Have Been Taken Away
You will forfeit your right to redeem if you do not vacate the property within ten days of receiving a written demand for possession from the buyer.
After a Foreclosure, Eviction
Before initiating eviction proceedings after an Alabama foreclosure sale, the buyer must give you ten days’ notice to leave.
For information on foreclosure defense call us at (877) 399 2995. We offer litigation document review support, mortgage audit reports, securitization audit reports, affidavit of expert witness notarized, and more.