Real estate foreclosure law has some terms that tend to confuse people. For example, people often mix up the terms “redemption” and “reinstatement.”
In most states, when a lender starts a foreclosure action, the borrower in default has a right of redemption or reinstatement. (In Georgia, there is no right of redemption.)
These two legal concepts often cause confusion among borrowers.
When you fall behind in your mortgage payments, after giving you proper notice, your lender (either through a loan servicer or a trustee) will start foreclosure proceedings against you.
Foreclosure laws differ from state to state which is why, if you are facing foreclosure, you should consult with an attorney who practices in the state where you live.
In Georgia, if you are delinquent in your mortgage payments, before nonjudicial foreclosure proceedings can begin, the loan servicer will send you a notice commonly called a “breach letter.” Among other things, the breach letter will inform you that your loan is in default.
When you default in your mortgage payments, the deed which you gave as security for your loan (the money you took from the bank to buy your home) has a clause in it that allows the lender (i.e., the bank) to demand the entire loan amount if you are delinquent in your payments. This letter will also inform you of how much is required to cure the default, and the date by which you must “cure” the default.
If you fail to pay the required amount by the date in the letter, foreclosure proceedings could be initiated.
Once a foreclosure has started, can you still pay the lender and avoid foreclosure?
That’s where the concepts of “redemption” and “reinstatement” come into play.
Reinstatement refers to “reinstating” your original loan. You reinstate a mortgage and cure any default by paying all delinquent amounts plus any interest, fees or charges.
By catching up on all your missed payments and interest and late fees ect., you restore your loan to its original condition and resume your agreed-to payment terms and schedule. And you keep your home.
Although there is no statutory right to reinstatement in Georgia, (except for high cost loans) most Security Deeds provide the borrower the right to cure the default after acceleration and reinstate the loan up to 5 days before the nonjudicial foreclosure.
Redemption, on the other hand is where you “redeem” your loan. It essentially means that you have the right to pay off the total debt, including the principal balance, along with certain additional costs, and interest in order to reclaim the property.
In Georgia, there is no statutory right of redemption after the foreclosure.
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