The Alabama Statutes specifically provide for deeds in lieu of foreclosure.

Pursuant to § 35-10-50 of the Alabama Statutes,"a deed in lieu of foreclosure"is defined as "any instrument, however denominated, whereby a mortgagor transfers to a mortgagee the mortgagor's rights in mortgaged property."

With regard to the consequences of entering into a deed in lieu of foreclosure, §§ 35-10-51 (which is entitled "Effect of deed in lieu of foreclosure") provides as follows:

§§ 35-10-51. Effect of deed in lieu of foreclosure.

A deed in lieu of foreclosure:

1. Transfers to the mortgagee all right, title and interest of the mortgagor in the mortgaged property, including but not limited to all rights of redemption, statutory or equitable, unless expressly otherwise provided therein;
2. Does not effect a foreclosure of the mortgage covering the mortgaged property;
3. Does not give rise to a statutory right of redemption in the mortgagor or in any other person;
4. Does not result in a merger of the mortgagee's rights with the mortgagor's equity of redemption for any purpose; and
5. Does not affect the rights or interests of any person or entity other than the mortgagor in the mortgaged property.

(Acts 1987, No. 87-660, p. 1168, §§ 2.)

One of the more important considerations arising from the above is that under Alabama law, a deed in lieu of foreclosure (unlike a foreclosure sale) extinguishes any right of redemption. This is made clear by the language of the statute, as well as the holding of the Supreme Court of Alabama in the case of Halstead v. Windsor, 662 So.2d 1124 (1995).

By:      Marc A. Rapaport
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