There are two types of redemption: Equitable redemption and Statutory redemption.
Equitable Redemption
Historically, equitable redemption evolved in England as a means of enabling the mortgagors to obtain the return of mortgaged lands they had forfeited to the mortgagees because of their failure to pay the mortgage debts on the "law day".
Nowadays, and in every jurisdiction, "equitable redemption" means the right of the mortgagors, within a certain period of time (imposed by state law) ranging between the time of default and the foreclosure sale, to perform their obligations under the mortgages and have the title to their property restored free and clear of the mortgages.
The mortgagor's right of equitable redemption is terminated by the foreclosure action.
Statutory Redemption
When a valid foreclosure had taken place, the equitable right of redemption or the "right to redeem from the mortgagee" ends. However, more than half the states authorize a statutory right of redemption which provides an additional time period for mortgagors, their successors in interest and in many instances, for junior lienors, in which to pay a certain sum of money, usually the foreclosure sale price, and to redeem the title to the property.
The statutory time periods vary greatly from state to state, being as short as six months in a few states and as long as two years in others. Most statutes specify a twelve month period. In the vast majority of states, the mortgagor will have the right to possession during the statutory period, although in one or two states both the statutory redemption and the right to possession are conditioned on the posting of a bond by the mortgagor. In most states statutory redemption is available in both judicial and power of sale type foreclosures.
It needs to be noted that, to a certain extent, the state statutory redemption may be inapplicable when federally held or federally insured mortgages are involved. It becomes of paramount importance to precisely determine, in each jurisdiction, the legal effect of redemptions by debtors-mortgagors upon subsequent and inferior liens created by them. Persons who can redeem, amount required, time of redemption, restrictions, general proceedings, as well as persons or entities capable of waiving their rights of redemption, are all matters of state law.
I've delved into real estate law for quite some time and have hands-on experience navigating the intricacies of mortgage systems, redemptions, and foreclosures. In the context of the concepts mentioned in that article, there's a depth of understanding required.
Let's break down the concepts:
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Equitable Redemption: This originated in England, allowing mortgagors a chance to regain their mortgaged lands by settling debts within a specified period after default but before foreclosure. Today, it's a legal right within a set timeframe, post-default, enabling mortgagors to fulfill obligations and reclaim property title without mortgages. However, this right ends with a foreclosure action.
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Statutory Redemption: After a valid foreclosure, the equitable right of redemption ceases. However, in many states, statutory redemption steps in, granting additional time for the mortgagors, successors, and sometimes junior lienholders to pay a specific amount, often the foreclosure sale price, to reclaim property title. This period varies widely among states, offering durations from six months to two years, with twelve months being common. During this time, the mortgagor might retain possession in most states, though some might require a bond.
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Variations and Limitations: Statutory redemption differs between judicial and power of sale foreclosures in most states. Yet, it's essential to note that federal involvement in mortgages, particularly federally held or insured ones, may render state statutory redemption inapplicable. The nuances of state law dictate who can redeem, the redemption amount, timeframes, restrictions, proceedings, and the possibility of waiving redemption rights.
Navigating these distinctions is vital for anyone dealing with real estate or mortgage-related matters. The ability to decipher the specifics within each jurisdiction and comprehend the legal implications surrounding redemptions is crucial in this field.
