Blog Post

Alabama Foreclosure Laws

Posted by: Paula Greenway
June 27, 2008
Topic: Alabama Home Foreclosure

Alabama Foreclosure Laws

In Alabama, two types of foreclosures are available: judicial and non-judicial.

Judicial Foreclosure: A judicial foreclosure is a process by which a mortgage holder files a lawsuit to obtain a court order to proceed with a foreclosure. This happens when the mortgage on the property does not contain a "power of sale" clause. The is not the common method for foreclosure in Alabama, but does happen on occasion.

Non-judicial Foreclosure: A non-judicial foreclosure occurs when a "power of sale" clause is present in a mortgage. A "power of sale" clause is a portion of the mortgage document, signed by the person taking out the mortgage, which preauthorizes the bank or other lender to foreclose on the property in the event of a default. There are guidelines that the bank or lender has to follow in order to foreclose. I will briefly state these below, but it is a good idea to look at your mortgage for other specifics.

Guidelines for "Power of Sale"/Non-judicial Foreclosure: The "power of sale" clause should contain details as to how the sale is to be held, i.e. time, place, etc. However, if it does not, the sale should be held at the front door of the courthouse, in the county for which the property is located. The sale shall be held between the hours of 11:00 a.m. and 4:00 p.m., and shall be to the highest bidder, for a cash purchase. The sale must be published, by the lender, in a newspaper of general circulation in the county in which the property is located. If there is no such paper in the county of property location, then a paper of an adjacent county may be used. The sale must be published for three (3) consecutive weeks, with the sale being held the following week.

The borrower may stop the sale by making payment of all payments due and owing prior to the foreclosure sale. This amount includes all costs and fees.

Redemption of Property Post Foreclosure: In Alabama, there is a statutory one (1) year right of redemption. The party whose property has been foreclosed may reclaim the property during that one year period by making payment of all unpaid loan costs and fees, plus any property preservation fees incurred. If you sign a deed in lieu of foreclosure, no redemption right is available.

Deficiency Judgments after Foreclosure: A bank or lender may obtain a judgment, for the amount owing on the loan, after the proceeds from the foreclosure sale. In other words, if you owe $90,000 on your mortgage and the house sales at foreclosure auction for $60,000, the bank can come after you for a deficiency judgment for $30,000. However, if you sign a deed in lieu of foreclosure, the bank holding the first mortgage cannot obtain a deficiency judgment. Second mortgages which are not paid at for auction can also come after you for a deficiency judgment to obtain the amount they are owed.

Alabama foreclosure law is covered in the Code of Alabama (1975). Foreclosure sales are covered in Title 35 (Property) Articles 1, 1A, 2, 3 §35-10-1 et. seq. (Powers Contained in Mortgages, Foreclosure by Power of Sale).

I hope this information is helpful to you. Should you have any questions, please feel free to contact me, Paula Greenway at paula@greenwaylaw.com or by phone at 205-324-4000.

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