Mortgage loans make it possible for home buyers to borrow the money they need to become homeowners. But every mortgage also carries the risk of foreclosure should the borrower be unable to pay back the loan according to the lender's terms. The end result of foreclosure may be an eviction in which the homeowner must vacate the property, but there are ways to avoid this fate.
A mortgage redemption is a period of time during which a foreclosed homeowner has the right to pay all past-due mortgage payments, plus late fees and foreclosure fees. Homeowners who can pay this amount during the redemption period retain the home and continue to pay off the mortgage according to its original terms. Each state has its own mortgage redemption laws, and some states don't require lenders to offer a redemption period at all.
Once a home is foreclosed on, which may take several months depending on state laws and the number of foreclosures that the courts and lenders must process, the redemption period begins. A mortgage redemption law requires the lender to accept back payments if the homeowner can raise the necessary funds in time. Some mortgage lenders use acceleration clauses to prevent homeowners from taking advantage of mortgage redemption. This type of clause states that once the homeowner goes into foreclosure, the entire balance of the mortgage, not just the past-due amount plus fees, is required to reinstate the mortgage and avoid eviction.
Mortgage redemption gives the homeowner one final chance to catch up on his mortgage and stay in his home. Homeowners who fall behind on their mortgages because of rising interest rates or a major financial emergency may not be able to raise the necessary funds to take advantage of mortgage redemption. But those who fall only slightly behind or experience a temporary loss of income, yet find their lenders unwilling to negotiate alternatives to foreclosure, can use mortgage redemption to stay in the home. The limits that states place on mortgage redemptions give lenders the opportunity to sell the property to someone else and recover at least part of their losses from making a bad loan.
Length and Limits
The length of a mortgage redemption period varies by state but is usually measured in months. For example, in Minnesota a mortgage redemption period lasts six months. However, Minnesota also offers 12-month redemption periods for foreclosures where the property is more than 40 acres in size or the homeowner's amount due is less than two-thirds of the original mortgage principal and the property is more than 10 acres in size.