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 We never repealed (or at least amended) this law.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.
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