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The Foreclosure Redemption Process in New Mexico

Nathan S. Stimson

Keleher & McLeod, P.A.

Table of Contents:

Redemption – Definition and Origin ...............................................................................................1

Overview of the Foreclosure Process ..............................................................................................1

History of Redemption in New Mexico ...........................................................................................2

The Redemption Statute ...................................................................................................................2

The Foreclosure Redemption Process ..............................................................................................3

General Principles ............................................................................................................................6

Form: Petition for Redemption of Real Property .............................................................................9

Form: Stipulated Order Granting Petition for Redemption of Real Property ................................12

Form: Certificate of Redemption ...................................................................................................14

Redemption – Definition and Origin:

Definition (Merriam-Webster): “the act, process, or result of redeeming something or

someone: such as . . . the act of making something better or more acceptable . . . [or] the

act of exchanging something for money, an award, etc.”

Origin (Merriam-Webster): first known use of “redemption” dates to the 14th century;

from Latin redemption-, redemptio

Overview of the Foreclosure Process:

Plaintiff files a Complaint for Foreclosure

[Court-ordered foreclosure settlement program, litigation, summary judgment, default

judgment, etc.]

Court enters Judgment against Defendant(s)

Judgment appoints Special Master to sell Property at foreclosure sale

Plaintiff files and publishes a Notice of Sale advertising sale of Property

Special Master sells Property at foreclosure sale as noticed in the Notice of Sale

Special Master files Report of Sale identifying Purchaser and sale price

After 10-day objection period (Rule 1-053(E)(2) NMRA), Plaintiff submits to Court a

proposed Order Approving Sale and Special Master’s Report

[Deficiency judgment, filing of appraisal, etc.]

Court enters Order Approving Sale

Special Master executes Special Master’s Deed in favor of Purchaser

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History of Redemption in New Mexico:

“When any property shall be sold subject to liens and encumbrances, the purchaser may

pay the liens and encumbrances and hold the property discharged from all claims of the

defendant in execution; but the defendant may redeem the property within one year after

the sale thereof, paying to the purchaser, his heirs or assigns, the purchase money with

interest; when redeemed the purchaser shall have the growing crops, and shall not be

responsible for rents and profits, but he shall account for wastes.” Sec. 3126, C. L. 1897.

“As a general rule we agree that a statutory right of redemption is to be favorably regarded,

but, it is a statutory right that is not to be enlarged by judicial interpretation. We cannot

extend the time allowed for redemption nor waive any condition attached by the statute.”

Union Esperanza Mining Co. v. Shandon Mining Co., 1913-NMSC-059, ¶ 17, 18 N.M.

153, 135 P. 78.

The Redemption Statute:

NMSA 1978, Section 39-5-18: “Redemption of real property sold under judgment or decree of

foreclosure; notice and hearing; redemption amount; priority of redemption rights.”

A. After sale of real estate pursuant to the order, judgment or decree of foreclosure in the

district court, the real estate may be redeemed by the former defendant owner of the real

estate or by any junior mortgagee or other junior lienholder whose rights were judicially

determined in the foreclosure proceeding:

(1) by paying to the purchaser, at any time within nine months from the date of sale, the

amount paid at the sale, with interest from the date of sale at the rate of ten percent a

year, together with all taxes, interest and penalties thereon, and all payments made to

satisfy in whole or in part any prior lien or mortgage not foreclosed, paid by the

purchaser after the date of sale, with interest on the taxes, interest, penalties and

payments made on liens or mortgages at the rate of ten percent a year from the date of

payment; or

(2) by filing a petition for redemption in the pending foreclosure case in the district court

in which the order, judgment or decree of foreclosure was entered and by making a

deposit of the amount set forth in Paragraph (1) of this subsection in cash in the office

of the clerk of that district court, at any time within nine months from the date of sale.

Copies of the petition for redemption shall be served upon the purchaser of the real

estate at the judicial foreclosure sale and upon all parties who appeared in the judicial

foreclosure case; and

(3) the former defendant owner shall have the first priority to redeem the real estate. If the

former defendant owner does not redeem the real estate as provided in this subsection,

each junior mortgagee or junior lienholder shall have a right to redeem the real estate.

The order of priority of such redemption rights shall be the same priority as the

underlying mortgages or liens, as set forth in the court order, judgment or decree of

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foreclosure or as otherwise determined by the court. All redemptions must be made

within the time periods set forth in Paragraphs (1) and (2) of this subsection.

B. The purchaser of real estate at a foreclosure sale, upon being served with the petition for

redemption of the property, shall answer the petition within thirty days after service of the

petition.

C. The hearing shall be governed by the rules of civil procedure and shall be set upon the

earlier of the filing of a redemption by the former defendant owner or the expiration of the

period for filing a redemption. At the hearing, the judge shall determine the amount of

money necessary for the redemption, which shall include the money paid at the sale and all

taxes, interest, penalties and payments made in satisfaction of liens, mortgages and

encumbrances. If more than one redemption is filed, the court shall also determine which

redemption has priority pursuant to Subsection A of this section and which party is

therefore entitled to redeem the property. At the conclusion of the hearing, the district

court may order the clerk of the court to issue the certificate of redemption upon such terms

and conditions as it deems just.

D. As used in this section, the terms “owner”, “junior mortgagee”, “junior lienholder” and

“purchaser” include their respective personal representatives, heirs, successors and assigns.

E. For the purpose of this section, “date of sale” means the date the district court order

confirming the special master’s report is filed in the office of the clerk of the court.

F. The nine-month redemption period provided in this section is subject to modification

pursuant to the provisions of Section 39-5-19 NMSA 1978.

G. A trustee’s sale pursuant to a power of sale in a deed of trust as provided in the Deed of

Trust Act [48-10-1 NMSA 1978] is not a sale of real estate pursuant to a judgment or decree

of a court. A redemption after a trustee’s sale is governed by the Deed of Trust Act.

The Foreclosure Redemption Process:

Court enters Order Approving Sale, starting the clock for the Redemption Deadline

o Calculating the Redemption Deadline:

Section 39-5-18(A)(1), (2) require payment “at any time within nine months

from the date of sale”, but Section 39-5-18(F) allows for modification of the

nine-month redemption period pursuant to Section 39-5-19.

NMSA 1978, Section 39-5-19 (“Application; shorter redemption

period.”): “The parties to any such instrument may, by its terms,

shorten the redemption period to not less than one month, but the

district court may in such cases, upon a sufficient showing before

judgment that redemption will be effected, increase the period of

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redemption to not to exceed nine months notwithstanding the terms

of such instrument.”

Rule: Redemption Deadline is based on a calendar month (not a specific

number of days), and Rule 1-006(A)(1)(c) applies.

U.S. Bank National Association v. Martinez, 2003-NMCA-151, 134

N.M. 665, 666, 81 P.3d 608:

o “The redemption statute does not provide guidance on how

one month is to be calculated. Where there is no other

meaning indicated in the applicable statute, the term ‘month’

is construed to mean a ‘calendar month.’” Id. ¶ 3.

o “[A] calendar month should run from the date of the court

order triggering the right of redemption to the corresponding

date of the subsequent month.” Id. ¶ 5.

o “Based on the foregoing, we hold that the one-month

redemption period in this case, established by the trial

court’s order of March 5, did not expire until April 5. Since

April 5 was a Saturday, the petition for certificate of

redemption filed by Petitioner on Monday, April 7, was

timely.” Id. ¶ 8.

Rule 1-006(A)(1) NMRA: “When the period is stated as eleven (11)

days or a longer unit of time, (a) exclude the day of the event that

triggers the period; (b) count every day, including intermediate

Saturdays, Sundays, and legal holidays; and (c) include the last day

of the period, but if the last day is a Saturday, Sunday, or legal

holiday, the period continues to run until the end of the next day that

is not a Saturday, Sunday, or legal holiday.”

Redeemer pays Redemption Amount

o Calculating the Redemption Amount:

Purchase price at foreclosure sale, plus;

10% interest per annum, plus;

Any amounts Purchaser paid for taxes, interest, penalties, and liens (10%

interest per annum applies).

o Example:

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Scenario:

Purchaser purchased property for $150,000.00

Purchaser paid no taxes, interest, penalties, or liens

Court entered Order Approving Sale on Friday, December 6, 2019

Redeemer pays on Monday, January 6, 2020

Calculation:

$150,000.00 x .10 / 365 days = $41.10 per day

December 6, 2019 through January 6, 2020 = 31 days

Interest through January 6, 2020 = $41.10 per day x 31 days =

$1,274.10

Redemption Amount as of January 6, 2020 = $150,000.00 +

$1,274.10 = $151,274.10

o Two statutory payment options:

Section 39-5-18(A)(1) – Redeemer pays Purchaser directly:

Payment methods: check; wire funds; deposit in Purchaser’s

counsel’s trust account

Redeemer should obtain redemption quote from Purchaser

Section 39-5-18(A)(2) – Redeemer deposits funds in Court’s registry:

Redeemer must obtain order from Court permitting deposit of funds

(Rule 1-067 NMRA)

Redeemer should deposit overage to account for any unknown taxes,

interest, penalties, or liens paid by Purchaser

Redeemer files Petition for Redemption

o Not required under Section 39-5-18(A)(1), but provides a court record

o Purchaser serves Petition for Redemption on Purchaser and parties who appeared

in the judicial foreclosure case

o Purchaser must answer Petition for Redemption within 30 days of service

o If multiple Petitions for Redemption filed, Section 39-5-18(A)(3) determines

priority, with defendant former homeowner having first priority to redeem

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Mortgage Electronic Registration Systems, Inc. v. Montoya, 2008-NMCA-

081, ¶¶ 6, 13, 144 N.M. 264, 186 P.3d 256 (noting that the first-in-time rule

was superceded by Section 39-5-18(A)(3), effective April 2, 2007).

Court enters Order Granting Petition for Redemption, directing Court Clerk to issue

Certificate of Redemption; Court Clerk issues Certificate of Redemption

Redeemer records evidence of redemption in county records:

o If Property redeemed directly from Purchaser, Redeemer records Purchaser’s

acknowledged instrument evidencing redemption in county records

o If Property redeemed through Court, Redeemer records court-certified copy of

Certificate of Redemption in county records

o NMSA 1978, Section 39-5-23: “Duty to record redemption.”

A. In all cases of redemption of lands from sale pursuant to the provisions of

Sections 39-5-17 through 39-5-23 NMSA 1978:

(1) if the redemption is by payment to the purchaser, it is the duty of the

purchaser within forty-five days of receiving payment to create an

acknowledged instrument in writing evidencing the redemption; or

(2) if the redemption is by making deposit in the office of the clerk of the district

court upon approval of the redemption by the district judge, it is the duty of

the clerk of the court to create under the seal of the court an instrument

evidencing the redemption.

B. It is the duty of the party redeeming to record the instrument evidencing the

redemption in the office of the county clerk in the same manner as other

instruments of writing affecting title to real estate.

General Principles:

“Redemption is a statutory right that our courts construe narrowly.” Brown v. Trujillo,

2004-NMCA-040, ¶ 14, 135 N.M. 365, 88 P.3d 881.

“[W]e are not foreclosed from considering what the practicing bar has recognized or

assumed as to a particular redemption practice.” Mortg. Elec. Registration Sys. v. Montoya,

2008-NMCA-081, ¶ 16, 144 N.M. 264, 186 P.3d 256.

“In general, there are two situations in which a court will use its equitable powers to grant

a debtor an extension of the redemption period. In the first type of situation, the debtor

fulfills all of the requirements of the redemption statute, but redemption is not complete

because of a clerical error or technical mix-up. . . . In the second type of situation, courts

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look for evidence of fraud, deceit, or collusion to justify the grant of a redemption period

extension. . . . [A] trial court’s exercise of its equitable discretion requires some showing

of wrongful conduct on the part of the person against whom relief is sought.” Brown v.

Trujillo, 2004-NMCA-040, ¶¶ 21-22, 135 N.M. 365, 88 P.3d 881 (internal quotation marks

and citations omitted).

“The plain language of this statute makes clear that there are two requirements that must

be met in order to redeem property if the debtor chooses to redeem under subsection (A)(2)

and not pay the purchaser directly. Under subsection (A)(2), the debtor must (1) petition

the district court and (2) deposit a sum of money in the court registry within nine months

from the date of sale. Our cases have consistently held that substantial compliance with

both statutory requirements is required in order to redeem property. . . . [T]he debtor’s

failure to timely tender the required payment in cash goes to the core of the debtor’s

obligation under the redemption statute . . . . [I]t is effective action, not good intentions,

that the statute calls for. . . . [A] valid deposit is a prerequisite to the district court’s holding

a hearing to issue a certificate of redemption.” Chapel v. Nevitt, 2009-NMCA-017, ¶¶ 27,

37, 145 N.M. 674, 203 P.3d 889 (internal brackets, quotation marks, and citations omitted).

“[I]n Union Esperanza Mining Co. v. Shandon Mining Co., 18 N.M. 153, 135 P. 78 (1913),

our Supreme Court explained that in order to effectively redeem property, a debtor cannot

impose any conditions upon his tender of money pursuant to the redemption statute. In

that case, the debtor had tendered an amount less than what the purchaser claimed was

necessary to redeem and conditioned the tender on the purchaser’s providing a full release

of all debts owed and a deed to the property. Id. at 163, 135 P. at 80. The Court held that

‘a release of all demands would clearly so enlarge the redemption statute as to confer rights

clearly not within the contemplation of the Legislature.’ Id. at 166, 135 P. at 81.” Chapel

v. Nevitt, 2009-NMCA-017, ¶ 42, 145 N.M. 674, 203 P.3d 889.

“[Section 39-5-18(C)] provides that the court’s determination of the amount needed to

redeem the property ‘shall include the money paid at the sale and all taxes, interest,

penalties and payments made in satisfaction of liens, mortgages and encumbrances.’ . . .

There is no mention of improvements or betterments in the statute. Thus, the only funds

that a purchaser may recover under the redemption statute are those funds that the purchaser

paid to acquire the property. Those funds include the amount the purchaser paid for the

property, with interest, plus any taxes and penalties. . . . Those funds also include any

amount paid by the purchaser to satisfy outstanding liens or mortgages on the property,

with interest, plus taxes and penalties. . . . The statute does not allow the purchaser to

recover for any funds paid for improvements.” Chase Manhattan Bank v. Candelaria,

2004-NMSC-017, ¶ 8, 135 N.M. 527, 90 P.3d 985 (internal citations omitted).

“Although recording is not necessary to exercise a redemption right, Section 39-5-23(B)

provides that the redeemer has a duty ‘to record the instrument evidencing the redemption

in the office of the county clerk in the same manner as other instruments of writing affecting

title to real estate.’ Unlike Section 39-5-18(A), which unambiguously states that the

exercise of a redemption right must occur within the redemption period, Section 39-5-23

does not provide a specific time frame for recording. . . . [T]he statutory language of Section

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39-5-23(A)(1) does not mandate that the redeemer record within forty-five days; but only

that ‘an acknowledged instrument in writing evidencing the redemption’ is created within

that time.” Nationstar Mortg. LLC v. Chenoweth, No. A-1-CA-35696, 2018 N.M. App.

Unpub. LEXIS 125, at *14-15 (Ct. App. Apr. 2, 2018).

“[T]he rights of a junior encumbrancer not made a party to the foreclosure of the senior

mortgage are unimpaired and unchanged by the defective foreclosure. . . . The only absolute

right of a junior mortgagee, as against a senior mortgagee, is the right to redeem from the

senior mortgagee. The rights of an omitted junior encumbrancer remain precisely as they

were before the proceedings were instituted to foreclose the first mortgage. They are

neither enlarged nor diminished by the defective foreclosure.” Springer Corp. v. Kirkeby-

Natus, 1969-NMSC-045, ¶¶ 8-10, 80 N.M. 206, 453 P.2d 376 (internal quotation marks

and citations omitted).

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STATE OF NEW MEXICO

COUNTY OF BERNALILLO

SECOND JUDICIAL DISTRICT

PLAINTIFF,

Plaintiff,

v. No. D-202-CV-2019-00000

DEFENDANT,

Defendant.

PETITIONER,

Petitioner in Redemption,

v.

RESPONDENT,

Respondent in Redemption.

PETITION FOR REDEMPTION OF REAL PROPERTY

Petitioner in Redemption (“Petitioner”) petitions the Court pursuant to NMSA 1978,

Section 39-5-18(A)(2), for a certificate of redemption, and in support thereof states as follows:

1. Petitioner is a Delaware limited liability company.

2. The real property at issue in this action is more particularly described as:

[LEGAL DESCRIPTION]

The property is generally described with the street address of [STREET ADDRESS] (the

“Property”).

3. The Court entered a Judgment (the “Foreclosure Judgment”) in favor of Plaintiff

on [DATE].

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4. The Foreclosure Judgment, among other things, foreclosed Plaintiff’s first

mortgage lien encumbering the Property and appointed a Special Master to sell the Property at a

judicial foreclosure sale.

5. On [DATE], the Special Master sold the Property at a judicial foreclosure sale.

6. Respondent in Redemption (“Respondent”) was the successful bidder at the

judicial foreclosure sale.

7. Respondent bid [AMOUNT], which was the highest and best bid.

8. On [DATE], the Special Master filed her report of the judicial sale.

9. On [DATE], the Court entered its Order Approving Sale.

Count One – Certificate of Redemption

10. Petitioner incorporates by reference the allegations of the foregoing paragraphs as

though fully set forth herein.

11. On [DATE], Defendant assigned his rights of redemption concerning the Property,

including rights to excess proceeds, to Petitioner. A true and correct copy of the Assignment of

Redemption Rights, recorded in the records of the Bernalillo County Clerk on [DATE], as

Document No. 2019XXXXXX, is attached hereto as Exhibit A.

12. Petitioner’s right of redemption concerning the Property is superior to any other

person’s right of redemption concerning the Property.

13. No later than one (1) month after entry of the Court’s Order Approving Sale,

Petitioner will deposit with the Court Clerk’s Office a sum equal to the amount Respondent paid,

plus interest through such one-month period and any other amount required under Section 39-5-

18, or, alternatively, will pay such amount directly to Respondent by a date no later than the end

of such one-month period.

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14. Petitioner is entitled to redeem the Property from Respondent.

15. Petitioner is entitled to a certificate of redemption concerning the Property.

Prayer for Relief

WHEREFORE, Petitioner prays for an Order:

A. Determining the amount of money necessary for Petitioner’s redemption of the

Property, that Petitioner’s right of redemption concerning the Property is superior to any other

person’s right of redemption concerning the Property, and that Petitioner is entitled to redeem the

Property;

B. Directing the Clerk of the Court to issue to Petitioner a certificate of redemption in

Petitioner’s favor redeeming the Property from Respondent; and

C. Granting Petitioner any additional relief that this Court deems just and proper.

Respectfully submitted,

[SIGNATURE BLOCK]

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STATE OF NEW MEXICO

COUNTY OF BERNALILLO

SECOND JUDICIAL DISTRICT

PLAINTIFF,

Plaintiff,

v. No. D-202-CV-2019-00000

DEFENDANT,

Defendant.

PETITIONER,

Petitioner in Redemption,

v.

RESPONDENT,

Respondent in Redemption.

STIPULATED ORDER GRANTING

PETITION FOR REDEMPTION OF REAL PROPERTY

THIS MATTER came before the Court on Petitioner in Redemption’s (“Petitioner’s”)

Petition for Redemption of Real Property (the “Petition”). The Court, being advised that

Petitioner and Respondent in Redemption (“Respondent”) have stipulated to the entry of this

Order, and the Court being otherwise sufficiently advised in the premises, hereby GRANTS the

Petition and ORDERS as follows:

1. The Petition is well taken and the relief sought therein shall be, and hereby is,

granted.

2. Petitioner has the right to redeem the real property concerned in the Petition,

commonly known as [STREET ADDRESS] (the “Property”), and more particularly described as:

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[LEGAL DESCRIPTION]

3. The redemption amount good through [DATE], is [AMOUNT], which is the sum

of the amount of Respondent’s successful bid of [AMOUNT], plus interest through [DATE], on

such amount of [AMOUNT].

4. On [DATE], Petitioner tendered the redemption funds to Respondent by paying

[AMOUNT] directly to Respondent. Respondent accepted the redemption funds on [DATE].

5. The Clerk of the Court shall issue to Petitioner a Certificate of Redemption, the

form of which is attached hereto as Exhibit A. Upon issuance by the Clerk of the Certificate of

Redemption, Petitioner shall be entitled to immediate possession of the Property.

6. All right, title, and interest (including, but not limited to, redemption rights, if any,

of all other parties to this action) in and to the Property are extinguished, and title to the Property

is hereby vested in Petitioner.

DISTRICT COURT JUDGE

SUBMITTED BY:

[SIGNATURE BLOCK]

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STATE OF NEW MEXICO

COUNTY OF BERNALILLO

SECOND JUDICIAL DISTRICT

PLAINTIFF,

Plaintiff,

v. No. D-202-CV-2019-00000

DEFENDANT,

Defendant.

PETITIONER,

Petitioner in Redemption,

v.

RESPONDENT,

Respondent in Redemption.

CERTIFICATE OF REDEMPTION

I, Clerk of the Second Judicial District Court, State of New Mexico, within and for the

County of Bernalillo, do hereby certify that Petitioner in Redemption exercised its right of

redemption relating to the real property at issue in the above-captioned action, commonly known

as [STREET ADDRESS] (the “Property”), and more particularly described as:

[LEGAL DESCRIPTION]

including any improvements, fixtures, and attachments, such as, but not limited to, mobile homes,

and redeemed the Property from Respondent in Redemption, the purchaser at the Special Master’s

sale held in this matter.

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IN WITNESS WHEREOF, I have hereunder set my hand and Seal of this Court on

____________________________.

CLERK OF THE DISTRICT COURT

By:

Deputy