MBE Fast Fact: Statutory vs. Equitable Right of Redemption

This is an easy enough distinction but it's also a question that can easily trip you up if you don't know the distinction.  First a bit about foreclosure:

When a mortgagor (the borrower) fails to pay back the loan borrowed from the mortgagee (the lender), the mortgagee can foreclose on the mortgaged real estate. Almost all states require foreclosure by sale whereby the property is sold to satisfy the debt.

Redemption provides a 2nd chance for a borrower who has defaulted, and there are two types of redemption to keep in mind:

Redemption in Equity:

Redemption in equity allows the mortgagor at any time prior to the foreclosure sale to redeem the property by paying the amount due. If the note or mortgage contains an acceleration clause, then in order to redeem, the mortgagor will have to pay the full amount of the note or mortgage. Importantly, the right of redemption can not be waived in the mortgage itself.

Statutory Redemption:

A less commonly offered right of redemption is statutory redemption. Here, the mortgagor can redeem the property in a similar manner as stated above for a fixed period of time even after the foreclosure sale has occurred.