What Are the Steps in the Foreclosure Process in Alabama?

If you live in Birmingham, Alabama, and are behind on your mortgage payments, it is essential to learn about Alabama foreclosure laws and the foreclosure process. The foreclosure process begins when you do not have the money to continue making mortgage payments, whether through unemployment, mounting debt, divorce, or other financial struggles.

Foreclosure can be overwhelming and stressful, so understanding what to expect is important to staying on top of your situation and making the best decisions possible. To start, you need to understand what a foreclosure actually means and the five stages of the foreclosure process.

What is a Foreclosure?

During a foreclosure, your mortgage lender takes back ownership of your property after you default on your mortgage payments. Once the bank has foreclosed on the property, the lender then sells the property to try and make back some of the money that they lost due to the default payments.

Foreclosures are part of a legal process. While the general stages are the same, the process varies depending on the state where you live. In Alabama, foreclosures are primarily considered “nonjudicial,” which means the process takes place without courts being involved. Although Alabama law does not require that lenders send foreclosure notices to borrowers, your mortgage lender may be contractually obligated to notify you of any defaults and upcoming foreclosure proceedings.

The 5 Stages of the Foreclosure Process

Although laws vary from state to state, the general foreclosure process involves these five steps:

1. The borrower defaults on the loan they were provided for their mortgage.
2. The lender, bank, or mortgage company issues a notice of default (NOD).
3. The lender records a notice of trustee’s sale in the county office.
4. The lender attempts to sell the property at a public auction.
5. If the property does not sell at the public auction, the lender becomes the owner of the property.

In Alabama, most mortgage lenders are required to send a breach letter if you fall behind in your monthly payments. This notice tells you that the loan is in default, and if you don’t address the default and catch up on your payments within a certain period of time, the lender can accelerate the loan and move forward with the foreclosure process.

When the lender records the notice of trustee’s sale in the county office, in Alabama, the lender is required to publish a notice of the foreclosure sale in the local newspaper for three consecutive weeks prior to the sale. Additionally, in Birmingham, AL, you likely will qualify for a foreclosure mediation program where the lender and borrower work with a mediator to avoid foreclosure, potentially through loan modifications.

After an Alabama foreclosure sale, the purchaser of your home must give you ten days’ notice to leave and remove your belongings before they begin the eviction proceedings.

Additionally, when your home sells at a Birmingham foreclosure sale, the sale may not be enough to pay off the full amount owed on your loan. The difference between that sale price and the total debt owed is called your “deficiency balance.” Alabama laws allow lenders to bring a “deficiency judgment” or lawsuit against the borrower after the foreclosure process to make up the difference. This can be collected through a wage garnishment of your paycheck or a levy on your bank account.