What is the Special Right to Redeem?

Garrett Riley: Exercising the Special Right to Redeem

Garrett, a disc jockey at a local radio station, purchased his home in Romeoville, Illinois for $350,000 in 2006. His home is currently worth approximately $200,000. Garrett had been seeking a loan modification to reduce his monthly mortgage payment. A customer service representative from his servicer told him that he had to be in default on his mortgage payments to qualify for the Home Affordable Modification Program.

Garrett did not know the statement was false, so he stopped making mortgage payments. Garrett's servicer filed a mortgage foreclosure action against Garrett while considering him for the loan modification. Garrett, still hopeful that he would receive his loan modification, did not fight the foreclosure action. The servicer obtained a default judgment against Garrett and took the property to a sheriff's sale. At the sheriff's sale, the only bidder was Garrett's servicer, which bid $200,000 for Garrett's property.

When the default judgment was entered against Garrett, the redemption value of his property was $325,000. This amount represented his unpaid loan balance plus other fees and costs. Since the servicer purchased the property from itself for less than this redemption amount, Garrett possessed the special right to redeem. Garrett had been saving his mortgage payments in a separate account since he stopped paying his mortgage. With those saved payments, plus a loan from a wealthy family member, Garrett was able to exercise his special right to redeem. As a result, Garrett's servicer assigned the bill of sale for Garrett's home back to him, with $125,000 remaining as a lien against Garrett's property. Although Garrett's home still has a lien against it, he now has $75,000 in equity in his property and the foreclosure case has been dismissed.

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