Statutory Redemption vs. Equitable Redemption

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May 17, 2008

Statutory Redemption

After foreclosure the borrower has a period during which he/she may attempt to regain ownership of the property. In many states this right is guaranteed by legislation, and could be up to 1 year in most States, if the borrower is able to pay the amount that the property was sold for at auction then he/she will be allowed to keep the property. This period is referred to as the statutory redemption period.

In States that provide statutory redemption, the borrower may continue to live on the property during the statutory redemption period after foreclosure. If after the statutory redemption period the borrower has not redeemed the property the purchaser at the foreclosure auction gets possession and the title deed to the property.

States that provide for statutory redemption usually have higher foreclosure sale prices, which benefits both the borrower and creditors whom have an interest in the property. In States without this protection such as Texas for example all foreclosure sales are final.

In the Sates with such statutes, where mortgagors(borrowers) may redeem property after a mortgage foreclosure, the states have allowed statutory redemption in order to drive up foreclosure sale prices; this benefits both the defaulting mortgagor and his creditors who have obtained an interest in the property. The mortgagor is given an opportunity to match the sale price. This often has the effect of causing potential buyers of the foreclosed property to adjust their bids.

In a State without such a statute, such as Texas, this statutory right of redemption does not exist, and this means that all foreclosure sales are final, unless the courts overturn it on procedure.

Equitable redemption

Equitable redemption is a common law concept arising out of judicial opinions. It grants the borrower the right to reclaim the property by catching up all arrears mortgage payments, at any time prior to foreclosure. The major difference between statutory redemption and equitable redemption is that statutory redemption begins at foreclosure while the right to equitable redemption ends at foreclosure. All state courts recognize and uphold a borrower’s right to equitable redemption.

If you are currently facing home foreclosure it is important that you know what the Laws in your State are and what your rights are in terms of these Laws. Consider consulting a Professional who knows the foreclosure Laws applicable in your State as well as the practices of various mortgage lenders and may be able to negotiate on your behalf and help save your family home.

For expert advice on avoiding home foreclosure contact HomeAssure.Com for a
FREE Foreclosure Consultation

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