Under Alabama (AL) foreclosure laws, both judicial and nonjudicial foreclosures are permitted. Alabama is generally considered a nonjudicial foreclosure state, so most foreclosures take place outside of court after a homeowner has defaulted on their mortgage loan and the Alabama pre-foreclosure process has been completed. The typical Alabama foreclosure takes between two and three months.
The Alabama Pre-Foreclosure Process
As in most other states, federal law discourages the initiation of foreclosure proceedings in Alabama until the borrower has fallen 120 days past due on their mortgage loan payments. Although this period of time is not officially part of the pre-foreclosure process, real estate investors should consider it an essential part of investment strategy because many homeowners in this stage feel they have entered “pre-foreclosure” and may be considering selling their properties.
Most Alabama foreclosures are nonjudicial thanks to the power-of-sale clause included in most Alabama mortgages. Lenders must publish notice of the foreclosure sale in the local newspaper once a week for three consecutive weeks prior to a foreclosure sale, but, unlike most states, Alabama foreclosure laws do not require lenders to send direct notice of the foreclosure to the borrower. Despite this, most mortgages in Alabama do require the foreclosing party to mail the borrower a “breach letter,” which notifies them about the loan default and upcoming foreclosure proceedings, and mortgages taken out in 2016 and later also usually require Alabama foreclosures to be preceded by a notice to the homeowner regarding their right to redeem their property. This notice usually will arrive about 30 days prior to the foreclosure sale (if it is sent closer to the date than this, the sale likely will be rescheduled) and is a good benchmark for real estate investors hoping to buy Alabama foreclosures and working with homeowners to figure out where they are currently in the Alabama pre-foreclosure process.
Alabama also offers statewide foreclosure mediation programs designed to help homeowners deal with foreclosure and, in some cases, avoid it. Under Alabama law, delinquent borrowers may be able to access financial assistance to catch up mortgage payments through the Hardest Hit Alabama Program. This program was initiated after the housing crash in the mid-2000s, closed, and was reopened in 2020 to aid homeowners facing financial difficulties resulting from the COVID-19 pandemic.
Unless the terms of the mortgage state otherwise, Alabama homeowners facing foreclosure have the right to pay off their mortgage debt and stop the foreclosure process any day prior to the day of the foreclosure sale.
Alabama Foreclosures: Notice of Sale & Auction
The foreclosure sale takes place at the courthouse specified and either online or in person, depending on the parameters of the sale platform at that point in time. After the foreclosure sale and upon payment, a deed is given to the winning bidder.
Alabama foreclosure laws permit homeowners to redeem their properties for up to one year after the foreclosure sale, but the terms of many home loans specify a much shorter window. Additionally, Alabama foreclosure law states that loans originated after January 1, 2016, may have a much shorter right-of-redemption period (180 days) if the borrower claimed a homestead exemption on the Alabama foreclosure the year of the sale and the lender provided notice about state right-to-redeem policies 30 days prior to the foreclosure sale. Regardless of whether proper notice is served or not, homeowners are not permitted to redeem Alabama foreclosures more than a year after the foreclosure sale.
Alabama Foreclosure Deficiency Judgments
Alabama foreclosure laws permit deficiency judgments if the price for which an Alabama foreclosure sells at the foreclosure sale is less than is owed on the home. However, if the foreclosure was nonjudicial, the lender will only be able to obtain a deficiency judgment by filing a lawsuit after the conclusion of the foreclosure.
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