The History of Alabama Rights of Redemption Laws -- Caution, I said History...

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As you may have heard recently, Fannie Mae will not buy loans that have any redemption period after a foreclosure. You can read the announcement here.

In Alabama, the right of redemption period is 1 year. But there is no point for Fannie Mae not to buy these loans, because a foreclosure bond can be purchased which protects the lender in the event that someone came back to redeem the property. Very few actually redeem, and if it happens it happens very quickly. I found a few resources that show the foreclosure redemption periods in each of our 50 states. Source1 and Source2. They actually have conflicting information, but either way, there are not many states with a redemption period of 365 years.

Now, for the history lesson of Alabama. Post Civil War, lots of loans were given for rebuilding. But the banks were allowed to call a loan at any time they wanted (known as a demand loan) with a 30 day notice. It didn't matter whether the borrower was behind on their mortgage or not. This posed a problem, as it could be difficult to find new financing if the bank that lent to money needed it back. This led to carpetbaggers swooping in and buying foreclosed properties on called loans that were worth significantly more than the amount that the bank called. All this happened because the owner didn't have enough time to refinance.

So Alabama (and obviously others) made a law to allow a person to redeem their property if the bank foreclosed on them and took it back. Well, a federal law was eventually passed which stopped banks for being able to demand mortgage loans be returned unless the borrower was in default. Well, Alabama didn't get the memo. We never repealed (or at least amended) this law. So we have an aged law on the books that needs to be scrapped -- or at least the amount of redemption time shortened. If not, it could have a huge affect on the real estate market in Alabama.

Comments (2)


I like reading this. thanks for the history lesson, but i disagree with your seeing a need for right of redemption to be scrapped.

where that law really makes a lot of sence still today, is for someone who has no mortgage, or home loans whatsoever, who has fallen behind on their taxes.

if you can pay off whats owed on taxes plus pay off the guy who gained interest at the tax sale plus interest, you can get your property back.

It does need to be re written so it shouldnt apply to someone who is behind on all the loans they took out, for stuff they didnt really need.

but, Taxes is really the only salvation you have. lets just say that you are free and clear on any and all loans against the house. why would you then not pay uncle sam?

if someone was free and clear they would be out of their mind not to pay their taxes and risk losing their lifes work, unless they are really and truly hurting.

Myself personally, if i was free and clear, just using what seems to me anyway, simple logic, If it came down to it and i really was that broke, i would pay uncle sam long after i quit paying the electric bill.

right of redemption is antiquated in that it gives people who owe hundreds of thousands on a mortgage or refinance false hope that they can get their place back for taxes plus what they owe the high bidder. not true at all, they still must pay off their mortgage company in full too. the mortgage does not just disappear, as so many people believe who dont really know what the law says. I believe fully that that part of the law should be scrapped altogether cause its useless.

but, if however you lost your job a year or more ago and still cant find another one, and your property is truly free and clear of any debt, and you are facing the daily reality of having to stop paying uncle sam, that is where the right of redemption law really does shine and still protects a lot of people.

on contrast, today, at least in florida where i originally came from, if someone is 10 days late on his taxes, he gets a warning notice to pay, if it doesnt get paid, he gets a notice for a sale and legally has up to the night before the sale, before the Tax Collectors office closes, to pay. once the sale takes place their is not a thing in the world he can do. not even god could give him his property back except after he goes up.

so thats where the carpetbaggers hang today. as soon as a sale notice is issued out, the florida real estate interests work as hard as they possibly can to hide the fact that you can in fact take posession of your property by paying the taxes, after the sale notice is sent to you. they follow that stuff closely and will even send people fake, official looking documents to discourage them from trying to get it back after they got the sale notice.


Jul 14, 2010 01:17 PM
Brooks Conkle
ForeFront Real Estate LLC - Mobile, AL

Great point of view, thanks for the response!

Jul 22, 2010 01:40 AM