The idea of redemption of property has existed since biblical times. In the United States, statutory rights of redemption were enacted during the 19th century to assist property owners, particularly farmers, through difficult economic times. Legislators may now be taking a fresh look at rights of redemption in this latest economic downturn.
What Is Mortgage Redemption?
Mortgage redemption is the process by which someone can redeem or reacquire the title to their property following a default on their mortgage, or a foreclosure sale. Until the redemption period ends, an owner can pay the loan, or other required amount, and save, or "redeem" his interest in the property.
Statutory Right of Redemption
A statutory right of redemption is a legislative enactment by a state that allows a property owner to redeem property within a set time period, sometimes even after a foreclosure sale has occurred. The duration of the statutory right of redemption is set forth in the statute. Not all states have a statutory right of redemption. The right exists only if there is a specific law granting it.
The equitable right of redemption, also referred to as the "equity of redemption," is a common law right. That means it may exist even in states that do not have a statutory right. The equitable right of redemption arises at the time of default and generally lasts until a foreclosure sale occurs. Equitable rights also differ from state to state.
Cost of Redemption
Even if a property owner has a right of redemption, exercising it may be difficult due to the cost. In the case of equitable redemption, which usually occurs prior to the foreclosure sale, the cost may be all past-due loan payments, or the entire amount due to the mortgage holder. In addition to principal and interest, court costs, attorneys' fees and other charges may also be added to the amount due. For statutory rights that extend past the foreclosure sale, the cost may be the sale price of the property plus other charges.
Transfer of Redemption Rights
An owner can usually transfer his or her equity of redemption on a mortgage, but the transfer does not, however, relieve the borrower of his legal obligation to pay the debt, unless the new owner pays it in full.
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