MBE Rules · Real Property
Equity of redemption / statutory redemption
The rule
Equity of redemption: borrower may redeem by paying full debt (including default interest) BEFORE foreclosure sale. Cannot be waived ("clogging"). Statutory redemption: many states allow redemption for a period AFTER sale by paying the sale price.
In plain English
Before a foreclosure sale, a borrower can stop the process by paying what they owe. In some states, even after the sale, they can reclaim their property by paying the sale price within a certain time.
Worked example
Before the foreclosure auction, the homeowner pays off their mortgage debt, stopping the sale. In another state, after the house is sold, the former owner pays the auction price within a year to get the house back.
Memory hook
Redeem before or after? Equity = before, Statutory = after. Pay full debt before sale or sale price after.
The trap
Students think: Waiver of equity of redemption is allowed. Wrong, because it's considered 'clogging the equity'. The actual rule is it can't be waived.
How examiners test it
Test setup: borrower defaults, foreclosure sale pending. Trap: students miss timing distinction between equity (before sale) and statutory (after sale) redemption.
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