- There are two acceptable foreclosure methods in the state of Alabama. The judicial method requires the lending agent to file a lawsuit against the borrower for any past due payments. The court will generally set a deadline for the borrower to make the necessary payment. If these payments are not made, then the court will issue an order to sell the home to the highest bidder. The nonjudicial method allows the lending agent to enter a power-of-sale clause into the mortgage contract. This clause allows the lender to foreclose on the property, once the loan is defaulted, without obtaining a court order.
- The power-of-sale clause establishes guidelines that determine the foreclosure process. In the event that this information is not in the power-of-sale clause, the state of Alabama's regulations will take effect. A notice of sale must be published in the local newspaper at least once per week for four consecutive weeks. The auction may take place once 30 days have elapsed from the final newspaper publication.
- When the home sells for less than the balance due on the mortgage loan, then a deficiency has occurred. When this happens in Alabama, the lending agent has the right to file a lawsuit against the borrower for payment of this deficiency.
- In Alabama, the borrower has one final opportunity to keep the property after it has been sold at auction. This is accomplished by paying the full balance due on the property, plus any applicable foreclosure costs. This right of redemption lasts for one year after the auction takes place.