Location:
MORTGAGES;
Scope:
Other States laws/regulations;

OLR Research Report


July 29, 2010

 

2010-R-0327

Revised 12/9/11

COMPARISON OF STATE LAWS ON MORTGAGE DEFICIENCIES AND REDEMPTION PERIODS

By: James Orlando, Legislative Analyst II

You asked for a chart comparing state mortgage laws as to (1) whether states are classified as recourse or non-recourse and (2) redemption periods.

SUMMARY

When a lender forecloses on a mortgage, the debt often exceeds the amount that the lender recovers through the foreclosure sale. In states classified as “non-recourse,” the lender cannot seek a judgment against the debtor to recover the deficiency. “Recourse” states allow lenders to seek a deficiency judgment against the debtor.

It is difficult to classify states as strictly recourse or non-recourse. Almost all states allow deficiency judgments under certain conditions, for certain types of property or foreclosure proceedings. However, many states restrict not only the conditions under which deficiency judgments are allowed but the maximum recovery for the creditors. Based on information compiled by the National Consumer Law Center (NCLC), at least 10 states can be generally classified as non-recourse for residential mortgages: Alaska, Arizona, California, Hawaii, Minnesota, Montana, North Dakota, Oklahoma, Oregon, and Washington. Recent legislation also makes Nevada non-recourse in most cases for residential purchasers for mortgages obtained on or after October 1, 2009.

State laws also vary regarding the time in which a debtor may redeem a mortgage default. To varying degrees, all states allow debtors to cure defaults before a property is sold through the foreclosure process. However, many states, under various conditions, allow debtors to redeem even after the foreclosure sale.

REDEMPTION PERIODS AND DEFICIENCY JUDGMENTS IN OTHER STATES

For this report, we relied on the compilation of state laws in NCLC's “Survey of State Foreclosure Laws,” part of a 2009 NCLC study, “Foreclosing a Dream,” written by John Rao and Geoff Walsh. We verified and updated the information as necessary.

The NCLC reports are available at the following links: http://www.nclc.org/images/pdf/foreclosure_mortgage/state_laws/foreclosing-dream-report.pdf and http://www.nclc.org/images/pdf/foreclosure_mortgage/state_laws/survey-foreclosure-card.pdf.

Table 1 summarizes the post-sale redemption periods and deficiency judgment provisions in the 50 states and District of Columbia.

Table 1: State Laws on Post-Sale Redemption Periods and Deficiency Judgments

State

Post-Sale Redemption Period

Deficiency Judgments Allowed?

Citations

Alabama

Yes—one year; to preserve right, debtor must surrender possession within 10 days of written demand

Yes

Code of Ala. 6-5-247 to 257; see In re Phillips, 2010 Bankr. LEXIS 710 (Bankr. N.D. Ala. 2010)

Alaska

None for non-judicial power of sale foreclosure; one year for judgment debtors in judicial foreclosure (less common)

Only for judicial foreclosures sales (not common); disallowed after sale by trustee under deed of trust

Alaska Stat. 09.35.250, 34.20.090, 34.20.100; see Hull v. Alaska Fed. Sav. & Loan Ass'n, 658 P.2d 122 (Ala. 1983)

Arizona

None for non-judicial power of sale foreclosure; for less common judicial foreclosure, six months or, if property was abandoned and not used for agricultural purposes, 30 days

Not allowed for purchase money mortgages on one- or two-family dwelling of 2.5 acres or less, unless the court determines that the sale price was less that the judgment price due to diminution in value caused by the owner committing or permitting voluntary waste

Ariz. Rev. Stat. Ann. 12-1282, 33-729, 33-814(G)

Arkansas

None for statutory foreclosure; one year for judicial foreclosures (not common)

Yes, for lesser of indebtedness minus (1) sale price or (2) fair market value

Ark. Code Ann. 18-49-106, 18-50-108, 18-50-112

California

None for non-judicial power of sale foreclosure; two years if court grants a deficiency judgment

in judicial foreclosure (less common)

Not allowed on power of sale foreclosures or judicial foreclosures on one-to-four family owner-occupied dwellings; when allowed, limited by property's fair market value

Cal. Code Civ. Pro.

580b, 580d, 726(b), 729.010

Colorado

None (although lien holders may redeem)

Yes, person sued for deficiency may raise defense that debt holder did not bid fair market value

Colo. Rev. Stat. 38-38-106, 38-38-302

Connecticut

None (property may be redeemed prior to approval of the sale)

Yes, limited to difference between plaintiff's claim and property value as determined after a hearing

Conn. Gen. Stat. 49-14, 49-25

Delaware

None

Yes

Del. Code tit. 10, 5066; see Berg v. Liberty Federal Sav. & Loan Asso., 428 A.2d 347 (Del. 1981)

District of Columbia

None for non-judicial foreclosure; pre-judgment redemption for judicial foreclosure

Yes

D.C. Code 42-805, 42-816

Florida

Yes, before the later of the court clerk's filing of the certificate of sale or time specified in the judgment

Yes, within court's discretion

Fla. Stat. 45.031(8), 45.0315, 702.06

Georgia

None

Yes, court must approve sale and will do so only if property brought its true market value

Ga. Code Ann. 44-14-161

Table 1: -Continued-

State

Post-Sale Redemption Period

Deficiency Judgments Allowed?

Citations

Hawaii

None, may redeem up to three business days before sale

No, for mortgages after July 1, 1999

Haw. Rev. Stat. 667-27, 38, 42

Idaho

None

Yes, for lesser of indebtedness minus (1) sale price or (2) fair market value

Idaho Code 45-1508, 1512

Illinois

Yes, until later of seven months of service or three months of judgment (with exceptions)

Yes

735 Ill. Comp. Stat. 5/15-1508, 1603 to 1605

Indiana

None

Yes, if express written agreement and other conditions satisfied

Ind. Code Ann. 32-29-7-7, 32-30-10-7

Iowa

Yes, one year, but plaintiff may elect foreclosure without right of redemption, which allows borrower to delay sale; parties can agree to six month redemption period (and plaintiff loses right to deficiency judgment)

Yes, but waivable if parties agree to six month redemption period

Iowa Code 628.3, 628.26, 654.5, 654.20, 654.26

Kansas

Yes, three months if 1/3 of original debt has not been paid, otherwise 12 months; other conditions apply

Yes, court has discretion to (1) deny sale if bid is inadequate or (2) fix a minimum price

Kan. Stat. Ann. 60-2414, 60-2415

Kentucky

One year, but only if sale price is less than 2/3 of property's appraised value

Yes

Ky. Rev. Stat. Ann. 426.005, 426.220, 426.530

Louisiana

None

Yes, but only if property is appraised

La. Code Civ. Pro. 2771-2772

Maine

90 days after judgment for mortgages executed after Oct. 1, 1975; one year for older mortgages (unless mortgage states otherwise)

Yes, deficiency claim is limited to the amount established as of the date of the public sale; if

mortgagee is purchaser at public sale, deficiency is limited to the difference between the fair market value at the time of the sale and the sum due the mortgagee

Me. Rev. Stat. Ann. tit. 14 6322-6324

Maryland

None

Yes

See Greenbriar Condo. v. Brooks, 387 Md. 683 (2005); Fairfax Sav., F.S.B. v. Kris Jen Ltd. P'ship, 338 Md. 1 (1995)

Massachusetts

None

Yes, mortgagee must give 21 days' notice before sale date of intent to seek deficiency judgment

Mass. Gen. Laws Ann. Ch. 244 17A, 17B, 18

Table 1: -Continued-

State

Post-Sale Redemption Period

Deficiency Judgments Allowed?

Citations

Michigan

30 days to one year, depending on several factors

Yes, if mortgagee is purchaser, mortgagor can raise defense or setoff that property value at sale equaled amount of debt or that sale price was substantially less than true property value

Mich. Comp. Laws 600.3240, 600.3280

Minnesota

Generally six or 12 months, depending on several factors; may be reduced to five weeks if court makes certain findings, including that property (1) has less than five residential units, (2) is not used for agricultural production, and (3) is abandoned

Yes, but not allowed in power of sale foreclosure if six month redemption period applies

Minn. Stat. 580.04, 580.23, 582.30

Mississippi

None

Yes

Miss. Code. 11-5-111; see Dean v. Simpson, 235 Miss. 162 (1959)

Missouri

One year, but only allowed if mortgage holder is purchaser; notice requirements apply

Yes

Mo. Rev. Stat. 443.410, 443.420, 443.430

Montana

One year, but not allowed for small tracts (40 acres or less); if debtor's residence, debtor retains possession during redemption period

Only for judicial foreclosure (not common)

Mont. Code. Ann. 25-13-802, 25-13-821, 71-1-229, 71-1-232, 71-1-317, 71-1-318

Nebraska

None

Yes, for lesser of indebtedness minus (1) sale price or (2) fair market value

Neb. Rev. Stat. 76-1010, 76-1013

Nevada

None, but for mortgages obtained on or after October 1, 2009, may redeem up to five days before sale

For mortgages obtained on or after October 1, 2009, if creditor is financial institution, cannot obtain a deficiency judgment against debtors on mortgages for owner-occupied single family homes that were not refinanced. If allowed, limited to lesser of indebtedness minus (1) sale price or (2) fair market value.

Nev. Rev. Stat. 40.430, 40.455, 40.459, 107.080(5)

New Hampshire

None

Yes

N.H. Rev. Stat. Ann. 479.18; see Carrols Equities Corp. v. Jacova, 126 N.H. 116 (1985)

New Jersey

Only if creditor receives a deficiency judgment; six months after such judgment

Yes, limited by property's fair market value; if creditor receives deficiency judgment, debtor has six months to redeem

N.J. Stat. Ann. 2A:50-3 to 2A:50-4

Table 1: -Continued-

State

Post-Sale Redemption Period

Deficiency Judgments Allowed?

Citations

New Mexico

Nine months; mortgage can call for shorter period, but court can increase to nine months

Yes, but not allowed for power of sale foreclosure on residential loans for low income households (current annual income at or below 80% of area median income adjusted for family size)

N.M. Stat. Ann. 39-5-18 to 39-5-21, 48-10-16 to 48-10-17

New York

None

Yes, allowed if defendant appeared or was personally served; limited by property's fair market value

N.Y. Real Prop. Act. Law 1352, 1371

North Carolina

Ten days after sale or after filing of upset bid (bid for specified amount above reported sale price)

Yes, but 2009 legislation disallowed deficiency judgment for certain residential mortgages, with several conditions; not allowed if mortgagee was purchaser, borrower may show property's market value as defense and offset; deficiency judgment not allowed on purchase money mortgages if mortgagee was seller

N.C. Gen. Stat. 45-21.20, 45-21.27, 45-21.36, 45-21.38, 45-21.38A

North Dakota

60 days; 365 days for agricultural land

Not allowed for one-to-four unit residential property on 40 acres or less; when allowed, based on appraised value

N.D. Cent. Code 32-19-03, 32-19-18

Ohio

None (may redeem up to confirmation of sale)

Yes, property cannot be sold for less than 2/3 of appraised value

Ohio Rev. Code Ann. 2329.20, 2329.33

Oklahoma

None (may redeem up to completion of sale)

No deficiency allowed if borrower elects power of sale foreclosure on homestead; when allowed, limited by property's market value

Okla. Stat. title 12, 18 to 20, 686; title 46, 43

Oregon

None

Only for non-residential mortgages following judicial foreclosure

Or. Rev. Stat. 86.770

Pennsylvania

None

Yes, if creditor is purchaser, deficiency is limited by property's fair market value

42 Pa. Con. St. Ann. 8103(a); see Bundy v. Donovan (In re Donovan), 183 B.R. 700 (Bankr. W.D. Pa. 1995)

Rhode Island

None for non-judicial power of sale foreclosure (most common); three years after possession for less common foreclosure by process of law or through possession by “peaceable and open entry”

Yes

R.I. Gen. Laws 34-23-3; see Rhode Island Economic Protection Corp. v. Macomber, 658 A.2d 511 (R.I. 1995)

Table 1: -Continued-

State

Post-Sale Redemption Period

Deficiency Judgments Allowed?

Citations

South Carolina

None after sale; owner may redeem up to five days after sheriff takes property following execution

Yes, defendant has right to petition for appraisal (non-waivable for residential mortgages); deficiency limited by appraised value

S.C. Code Ann. 15-39-610, 29-3-660, 29-3-680, 29-3-740

South Dakota

One year, unless loan provides for 180 days (mortgagor has right of possession during 180-day period)

Yes, if mortgagee or holder is purchaser, deficiency is reduced by difference between fair market value and sale price; no deficiency if parties agree to voluntary foreclosure; other conditions apply for judicial foreclosures (less common)

S.D. Codified Laws 21-47-16, 21-48-14, 21-48A-1, 21-49-12, 21-49-38, 21-52-11

Tennessee

Two years; right to redeem can be waived in the mortgage

Yes

Tenn. Code Ann. 66-8-101 to 103; see Lost Mt. Dev. Co. v. King, 2006 Tenn. App. LEXIS 810 (2006)

Texas

None after sale; owner can redeem up to 20 days before notice of sale

Yes, the borrower is entitled to an offset if the court determines that the property's fair market value is greater than the sale price at the foreclosure sale

Tex. Prop. Code 51.002, 51.003

Utah

None

Yes, limited to difference between debt and property's fair market value

Utah Code Ann. 57-1-32

Vermont

None after sale; owner can redeem after judgment but before sale; in judicial foreclosure with no sale, can redeem up to six months after judgment and remain in possession

Yes

Vt. Stat. Ann. tit. 12 4528, 4532(i); Vt. Rules Civ. P. Rule 80.1

Virginia

None after sale

Yes

See In re Ross, 180 B.R. 130 (Bankr. E.D. Va. 1995)

Washington

None after non-judicial sale; owner can redeem after judgment up to 11 days before sale date; eight months to one year after judicial sale (less common)

Yes, but not allowed for non-judicial sales of non-commercial property

Rev. Code Wash. 6.23.020, 61.24.050, 61.24.090, 61.24.100

West Virginia

None

Yes

See In re Bardell, 374 B.R. 588 (N.D. W.Va. 2007); Fayette County Nat'l Bank v. Lilly, 199 W. Va. 349 (1997)

Table 1: -Continued-

State

Post-Sale Redemption Period

Deficiency Judgments Allowed?

Citations

Wisconsin

None

Yes, court must be satisfied that property's fair market value has been credited on the debt; mortgagor may waive right to deficiency for certain types of property, which moves sale up to 6 months after judgment, rather than one year

Wis. Stat. 846.101, 846.13, 846.165

Wyoming

Three months; 12 months for agricultural real estate

Yes

Wyo. Stat. 1-18-103, 34-4-113

JO:ts