Most ruthless foreclosure states

Laws vary widely from state to state. Do you know what kind of mortgage you have?

By Les Christie, staff writer

NEW YORK ( -- In Alabama, late-paying homeowners can lose their properties to foreclosure at breathtaking speed - as little as 30 days after a delinquency notice is published.

In New York State, the process can drag on for well more than a year.

With foreclosures spiking around the nation, homeowners should learn the foreclosure laws in their states - what you don't know can hurt you.

"The foreclosure laws tend to be very parochial," said Lawrence Jacobson, a real estate attorney in Los Angeles.

One major divide is whether the principal instrument securing the loan is a conventional mortgage or a "deed of trust." They are not the same even though everybody uses the term "mortgage" interchangeably.

In fact, deeds of trust are the more common of the two, used in 34 states either mostly or exclusively.

The difference is this: Mortgages involve two parties, borrowers and lenders, while deeds of trust have third parties, called trustees, who hold temporary title to the properties until borrowers pay off their loans.

That difference can be crucial when a borrower falls behind in payments. With deeds of trust, the trustees don't have to go to court to initiate a foreclosure; with a mortgage, the lender almost always does, which slows down the process.

In states where deeds of trust are an option, lenders almost always choose them over mortgages, because they are "non-judicial" - and quick.

California, where foreclosure might come as soon as 120 days following the delinquency notice, is one of them. Said Jacobson: "I've been a real estate attorney nearly 40 years and I have yet to see a mortgage in California."

In many states, the process can be even quicker. At 30 days, Alabama may be the speed champ but other states with deeds of trust are not far behind. In New Hampshire, Mississippi and others, it takes as little as 60 days. All these states use deeds of trust.

(To see how long it generally takes in your home state, go to and click on a state.)

In contrast, judicial foreclosure, which is the usual procedure when a mortgage is involved, can be slow. First a lawsuit must be filed. Then, there's a period of discovery and a court date must be set. And courts can grant delays to prepare cases. All told, it can take many months.

States with long time frames include Vermont (210 days), Florida and Nebraska (180 days). New York, at 12 to 19 months, is the state with the longest typical time frame.

Although home owners do lose their properties much quicker in most deed-in-trust states, they may enjoy one advantage: liberal "rights of redemption" are more common than in mortgage-only states.

That means even if your home is foreclosed on and auctioned off, there is a time period when you can pay the debt and get the home back.

The window is usually very brief, but can last for as long as a year after the property is sold at auction.

According to Alexis McGee, author of "The Guide to Making Huge Profits Investing in Pre-Foreclosures Without Selling Your Soul," the right of redemption can be tough on foreclosure buyers. "The state gives the owner the right to buy back the property for the price [the auction bidder] paid for it," McGee said. Any additional expenses buyers paid, such as for repairs or maintenance, is lost.

Foreclosures: Hardest hit zip codes.

One more wrinkle for home owners to note is that simply because they've lost their properties to foreclosure, it does not always mean they're completely off the hook for their debts. If the auction sale brings less than the amount owed to the lender, it may still go after the borrower for the balance.

That's called a "deficiency judgment," and it's a right that lenders do not enjoy in every state. As a practical matter, deficiency judgments rarely occur, but Jacobson knew of at least one case where it was invoked.

A couple owned a home that was totally destroyed in an earthquake. Its value to the lender fell to near zero and the owners had no insurance. The lender asked for a deficiency judgment - and won. Top of page