If you’re struggling to make your house payments in Alabama, you’d be wise to stay vigilant; a foreclosure sale might happen before you realize it. Although homeowners are generally entitled to a 120-day waiting period under federal law, once it expires, all the foreclosing party (the "bank") typically must do is publish the foreclosure sale date in the newspaper for three consecutive weeks before selling your Alabama house at a foreclosure sale.
Also, if the transaction fails to bring enough money to pay off the mortgage, the bank can pursue you for the difference.
When Can an Alabama Foreclosure Start?
If you fall behind on your monthly mortgage payments, the servicer (on behalf of the bank) can't simply take your home, like in a repossession. Before selling the property and using the proceeds to pay off your home loan, the bank must follow specific legal steps in a process called "foreclosure."
Under federal law, a servicer generally must wait until a mortgage loan is more than 120 days delinquent before starting the foreclosure process. After a loan is delinquent for over 120 days, the foreclosure can go forward using the procedure allowed by state law. (12 C.F.R. § 1024.41 (2024).)
What Types of Foreclosure Does Alabama Allow?
In Alabama, a bank can choose between one of two foreclosure procedures: judicial or nonjudicial foreclosure. Most foreclosing banks use the streamlined, less-expensive, nonjudicial process. Here are brief explanations of both types.
Judicial Foreclosure Process
A judicial foreclosure proceeding starts when the bank files a lawsuit in court. If the homeowner fails to respond to the lawsuit, the bank automatically wins and receives a default judgment.
If the owner decides to fight the action, the court will decide the case after hearing a summary judgment motion (a motion that asks the judge to find that the other side lacks a triable issue of fact) or trial. If the court agrees with the bank, it will enter a judgment against the homeowner. The judgment gives the bank the right to sell the home at a foreclosure sale.
Nonjudicial Foreclosure Process
With a nonjudicial foreclosure, the bank doesn't need to get a judgment from the court before selling the home. Instead, the bank follows procedural steps outlined in state law and, after completing the steps, sells the property at a foreclosure sale.
How Does the Alabama Nonjudicial Foreclosure Process Work?
Under Alabama law, the bank generally doesn't need to notify the homeowner before starting the foreclosure process. However, some Alabama mortgage contracts require the bank to send a breach letter before beginning foreclosure proceedings.
To complete the foreclosure, the bank must publish the foreclosure sale date in the newspaper for three consecutive weeks, and after the period elapses, the bank is free to sell the home. (Ala. Code § 35-10-13 (2024).)
However, if your mortgage is dated on or after January 1, 2016, you'll likely receive a notice about your right to redeem (see below) at least 30 days before the foreclosure sale.
Can I Go to Foreclosure Mediation in Alabama?
If you're going through a foreclosure in Alabama, you might be able to attend a foreclosure mediation program. To learn more about foreclosure mediation in Alabama, go to the Alabama Center for Dispute Resolution's website.
Reinstating the Loan in Alabama Before the Foreclosure Sale
Alabama law doesn’t allow homeowners to stop the nonjudicial foreclosure sale by paying all missed payments, fees, and costs in one lump sum, called “reinstating” the loan. However, homeowners who have the ability to do so should check their mortgage contract. Many contracts give the owner the right to reinstate the loan up to five days before the nonjudicial foreclosure sale.
Does Alabama Law Allow Deficiency Judgments?
In a foreclosure, the foreclosure sale price isn’t always enough to cover the outstanding mortgage. The difference is known as a "deficiency balance." In Alabama, the bank can sue the foreclosed owner in a separate lawsuit and obtain a deficiency judgment for the remaining amount.
The bank may then use common collection techniques, such as taking money out of your bank account (bank levy) or your paycheck (wage garnishment), to collect the outstanding balance.
Does Alabama Have a Redemption Period After Foreclosure?
Alabama allows the foreclosed homeowner to “redeem” the property (get it back) by paying the new purchaser the full sale price plus interest, property taxes, or any insurance premiums paid by the purchaser. How much time the foreclosed owner has to do so generally depends on whether it’s a homestead property.
To qualify as a homestead property, the owner of a residential property must file a homestead exemption in the local county during the tax year that the sale occurred. If you’d like to find out about filing a homestead on your property, visit the Alabama Department of Revenue.
Redeeming a Homestead Property If the Mortgage Is Dated January 1, 2016, or After
If the bank provided the homeowner with a notice of the right to redeem the property at least 30 days before the foreclosure sale, the redemption period is 180 days after the sale. This is applicable to mortgages taken out on or after January 1, 2016, for residential properties on which a homestead exemption was claimed in the tax year during which the sale occurred. (Ala. Code § 6-5-248(b) (2024).)
If the bank failed to provide timely notice before the sale, the redemption period would expire 180 days after providing notice. But homeowners can’t redeem, under any circumstances, more than one year after the foreclosure sale. (Ala. Code § 6-5-248(h)).
Mortgages Taken Out Before January 1, 2016
For mortgages taken out before January 1, 2016, the redemption period is one year. (Ala. Code § 6-5-248(b)).
Redeeming a Non-Homestead Property
Homeowners redeeming non-homestead properties have one year from the date of the foreclosure sale to do so.
Forfeiting the Right to Redeem
If the person who bought the home at the foreclosure sale gives a written notice demanding possession of the property, the foreclosed owner will have ten days to leave or lose the right to redeem the house. (Ala. Code § 6-5-251 (2024).)
Look Out for Legal Changes
This article contains details on foreclosure laws in Alabama with citations to statutes so you can learn more. Statutes change, so checking them is always a good idea. You can find the state's foreclosure laws in the Alabama Code in Sections 35-10-1 to 35-10-30 and Sections 6-5-247 to 6-5-257.
How courts and agencies interpret and apply the law can also change. And some rules can even vary within a state. These are just some of the reasons to consult with an attorney if you’re facing a foreclosure.