What is the redemption policy on FHA loans?

While many homeowners are struggling to keep their mortgage loan payments current, high unemployment rates are contributing to the thousands of foreclosures happening throughout the nation. Many state legislatures have decided that homeowners should have the power to recover their homes if their financial situation vastly improves within a certain amount of time. The right of redemption allows the homeowner to reclaim their property after foreclosure within a certain time period. Some homeowners may want to know what is the redemption policy on FHA loans.

The Right of Redemption on FHA Loans

The Federal Housing Administration (FHA) oversees several programs that promote home ownership. Buyers can purchase a home with a small down payment making it easier for them to qualify for a mortgage loan. The FHA guarantees the loan, thus protecting the lender if the borrower defaults on the loan. FHA loans cannot be put into foreclosure unless at least three mortgage payments have been missed. Owners who want to redeem their property must pay off the entire amount bid at the sheriff’s sale, including any interest. If redemption is not made or state law does not have a redemption period, the successful bidder will get the property.

When to Consult a Foreclosure Attorney

In May 2010, Fannie Mae announced that it will no longer extend loans or purchase any loans made on a foreclosed property during the state’s right of redemption period. As one of the largest mortgage holders in the nation, homeowners are worried that this could set a precedent and cause other lenders to follow suit. The right of redemption varies widely in each state, so it’s important to speak with a foreclosure attorney in your area.