How to Stop Foreclosure Using Right of Redemption Laws

The question of how to stop foreclosure depends on the state where you own property and where you are in the foreclosure process. Each state has its own laws, but they are similar in many regards. In most states, you have a right to stop foreclosure before default has occurred by bringing your mortgage payments current. After default has occurred, you may still have the right to redeem your property by paying the entire balance on a mortgage. This is called the "right of redemption" of your property.

History of Right of Redemption Laws

Many legislatures noted that lenders retained a tremendous amount of power in the home loan process. There were few options for homeowners in difficult situations to remain in their residences, and default often occurred even when the homeowner had a chance to repay the mortgage in the near future. To change the balance of power, many states began giving borrowers more rights. These rights include:

  • The possibility to stop foreclosure proceeding through bankruptcy
  • Options to defer payments on loan
  • Forbearance programs to stop immediate enforcement of foreclosure while borrowers were still making payments
  • Redemption options to recover the home from foreclosure, even if the home has already been sold at auction

Standard Right of Redemption Laws

Typically, redemption is only an option once a judge has already removed a home owner's claim on a property. It has potentially been sold to another buyer or at auction. There is a limited amount of time in each state in which the buyer may attempt to recover. This ranges from 30 to 90 days in most areas. During that period of time, if the borrower can provide payment in full on the remainder of the previous mortgage debt, the borrower can take the property back, reinstating any lost equity. 

Complications with Right of Redemption Laws

The key feature of redemption is the borrower must make a payment on the entire mortgage, not just the payments he or she missed. To do this, most borrowers will have to take a new loan. Borrowers who have just gone through a foreclosure will have tremendously poor credit. Many will seek hard money lenders, also known as high risk home lenders who provide mortgages against land and other collateral, in order to provide proof of funds for the home's purchase. These lenders charge high rates, high finance fees, and give small loans in comparison to the value of the collateral. As a result, this is typically only an option if the homeowner had a small remaining balance on the mortgage.

Redeeming your Mortgage

Start by researching right of redemption laws in your state. Your foreclosure attorney or judge will be able to point you in the right direction. If your financial circumstances have changed since your foreclosure, you may feel you are able to afford a new mortgage. You should begin approaching lenders to discuss your situation. Be prepared for skepticism; be willing to provide a large down payment and high proof of income. If you do secure enough funding to cover the previous mortgage balance, contact the court that presided over your foreclosure immediately.