PastPaperHero | Mortgages/security devices - Right to redeem and clogging the equity of redemption

Learning Outcomes

This article explains mortgage redemption doctrine for MBE purposes, including:

distinguishing equitable and statutory redemption, focusing on timing (pre‑sale vs post‑sale), amount required, and who receives payment;
identifying who may exercise redemption rights (mortgagors, successors, junior lienholders, and foreclosure purchasers) and what interests are cut off at each stage;
determining the correct redemption amount in scenarios involving acceleration clauses, reinstatement, and tender disputes;
recognizing invalid “clogging” provisions in original mortgage transactions, including waivers, oppressive bonus payments, purchase options, and disguised absolute deeds functioning as mortgages;
evaluating post‑default deeds in lieu, sale‑leasebacks, and other later bargains to distinguish legitimate workouts from impermissible attempts to circumvent redemption;
analyzing how redemption interacts with foreclosure methods, deficiency judgments, surplus and deficiency allocation, and the rights of junior and senior lienholders;
applying these rules to typical MBE fact patterns to eliminate distractor answers that confuse equitable and statutory redemption or ignore anti‑clogging doctrine on exams.

MBE Syllabus

For the MBE, you are required to understand mortgage redemption doctrine, with a focus on the following syllabus points:

The nature, purpose, and operation of the equity of redemption.
Who may exercise the equity of redemption and what must be paid.
The effect of acceleration clauses on redemption and reinstatement.
The doctrine against clogging the equity of redemption, including common fact patterns.
The existence, timing, and operation of statutory rights of redemption.
Differences between equitable and statutory redemption in timing, price, and parties.
The interaction of redemption rights with foreclosure methods, junior liens, and deficiency judgments.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

The common law right allowing a mortgagor to reclaim title and prevent foreclosure by paying the debt after default but before the foreclosure sale is known as:
1. Statutory right of redemption
2. Equity of redemption
3. Right of first refusal
4. Right of entry
Which of the following provisions, if included in the original mortgage agreement, would most likely be considered an invalid attempt to "clog" the equity of redemption?
1. An acceleration clause permitting the lender to demand full payment upon default.
2. A provision requiring the mortgagor to waive the equity of redemption if they default.
3. A due-on-sale clause requiring loan repayment if the property is sold.
4. A clause requiring the mortgagor to pay late fees on missed payments.
Statutory rights of redemption typically allow a mortgagagor to redeem the property:
1. At any time before default by paying the outstanding loan balance.
2. Only before the foreclosure sale by paying the outstanding loan balance.
3. For a fixed period after the foreclosure sale by paying the foreclosure sale price.
4. Only if the mortgagee agrees to the redemption after the foreclosure sale.

Introduction

When a mortgagor defaults on a loan secured by a mortgage, the mortgagee (lender) typically has the right to foreclose on the property. Foreclosure, however, does not immediately and irrevocably cut off the mortgagor’s interest. Mortgage law builds in powerful “second chances,” collectively called rights of redemption, which allow the borrower (and sometimes others) to save the property by paying money even after default.

There are two distinct types of redemption rights tested on the MBE:

The equity of redemption (a common law, judge‑made right that operates before foreclosure is complete).
The statutory right of redemption (a post‑sale, statute‑based right that exists only in some states).

Courts are especially protective of the equity of redemption. Any attempt in the original mortgage transaction to waive or substantially impair that right is generally void as against public policy. This protective idea is captured in the traditional maxim: “once a mortgage, always a mortgage.”

Key Term: Equity of Redemption
The common law right of a mortgagor, or the mortgagor’s successor in interest, to prevent foreclosure by paying the full amount of the mortgage debt, plus accrued interest and allowable costs, after default but before a valid foreclosure sale or strict foreclosure judgment becomes final.

Key Term: Clogging the Equity of Redemption
Any term in the mortgage instrument, or in a contemporaneous agreement forming part of the same transaction, that effectively prevents the mortgagor from redeeming the property by paying the debt, or that makes redemption so difficult or costly that the right is practically destroyed.

Key Term: Statutory Right of Redemption
A right created by state statute that allows the mortgagor (and sometimes junior lienholders or other interested parties) to regain title to property after a foreclosure sale by paying the foreclosure sale price (plus specified interest and costs) within a fixed statutory period.

These rights sit on top of the ordinary foreclosure rules you learn in real property. On MBE questions, you must be able to:

Identify who still has a redeemable interest at a given moment.
Determine how much must be paid to redeem.
Spot when a lender has tried to contract around redemption in a way that is invalid as a “clog.”
Distinguish equitable redemption from statutory redemption in timing, price, and parties.

The Equity of Redemption

The equity of redemption arises automatically the moment a mortgage is created. It reflects the idea that a mortgage is a security device, not an outright transfer of ownership. Until foreclosure is properly completed, the mortgagor retains an equitable interest and can “redeem” the property by satisfying the debt.

In lien theory states (the MBE default), the mortgage is treated as a lien; legal title remains with the borrower, and the lender’s interest is purely security until foreclosure. Even in title or intermediate title theory jurisdictions, where the lender technically holds title, the equity of redemption ensures that the borrower can reclaim full ownership by proper payment before foreclosure is complete.

Key Term: Foreclosure by Sale
A foreclosure method in which the property is sold (usually at a public auction) and the sale proceeds are used to pay the mortgage debt and costs, with any surplus going to junior lienholders and then the mortgagor.

Key Term: Strict Foreclosure
A foreclosure method, used in a minority of jurisdictions, in which a court sets a redemption deadline, and if the mortgagor does not pay by that date, title passes to the mortgagee without a sale.

Who May Redeem

On the MBE, assume the following can exercise the equity of redemption unless the question says otherwise:

The original mortgagor.
The mortgagor’s successors in interest (e.g., grantees who took title from the mortgagor, even if they took “subject to” the mortgage).
Junior lienholders whose interests would be wiped out by foreclosure (they can redeem by paying off the senior mortgage to protect their own liens).
In some cases, other holders of subordinate interests (e.g., tenants or easement holders) may redeem to protect their rights, though this is rarely tested.

Key Term: Junior Lienholder
A creditor whose mortgage or other lien on the property is subordinate in priority to a senior mortgage; junior lienholders are vulnerable to being wiped out by foreclosure of the senior mortgage but may protect themselves by redeeming the senior lien.

The equity of redemption runs with the land and with junior interests. It is not limited to the original borrower. If the mortgagor sells the property, the buyer ordinarily steps into the mortgagor’s shoes and can redeem. If a junior mortgagee redeems the senior mortgage, that junior mortgagee is typically equitably subrogated to the senior mortgagee’s position, now holding the senior lien they paid off.

What Must Be Paid to Redeem

To exercise the equity of redemption, the redeeming party must pay the full amount then due under the mortgage.

If the mortgage does not contain an acceleration clause and the lender has not otherwise validly accelerated, the mortgagor can usually cure by paying past‑due installments, plus interest and reasonable costs of collection. This is sometimes called reinstatement of the loan.

Key Term: Reinstatement
The act of curing a default by paying all past‑due installments, interest, and allowable costs so that the loan is brought current, as opposed to paying off the entire remaining principal balance.

If the mortgage does contain an acceleration clause and the lender has properly exercised it after default (the usual exam scenario), the mortgagor must pay:
- The entire outstanding loan balance,
- Accrued interest, and
- Reasonable foreclosure and attorney’s fees, as allowed by the mortgage and state law.

Key Term: Acceleration Clause
A mortgage provision that allows the lender, upon the borrower’s default, to declare the entire unpaid balance of the loan immediately due and payable.

Some jurisdictions give borrowers a statutory “right to cure” or “reinstatement” right up to a particular point (for example, a certain number of days before the sale), allowing them to avoid acceleration by paying only arrears. Unless the question tells you about such a statute, the MBE default is:

After valid acceleration, redemption requires payment of the full accelerated debt (principal plus interest plus allowable costs).

A mere promise or assertion of ability to pay is not enough; the mortgagor must actually tender the required amount. If the lender wrongfully refuses a proper tender, foreclosure can be enjoined.

For exam purposes, watch for answer choices that suggest redemption can occur by paying only missed installments after acceleration. Once acceleration is validly invoked, those answers are wrong.

Practical Mechanics of Tender

MBE questions occasionally turn on whether an attempted redemption was effective. Keep these points in mind:

Tender must be timely (before the equity of redemption is cut off).
Tender must be for the correct amount:
- If too little, redemption fails.
- If slightly excessive, courts generally treat it as sufficient.
Tender must be unconditional (the mortgagor cannot insist on unrelated concessions as a condition of payment).

If the lender disputes the amount, but the mortgagor deposits what the court ultimately finds to be sufficient into court or with the proper official within the redemption period, redemption will usually be upheld.

Timing: When the Equitable Right Ends

The equity of redemption exists after default but before foreclosure is complete. Precisely when it terminates depends on the foreclosure method:

In a foreclosure by sale (the typical MBE pattern), the equity of redemption terminates when the foreclosure sale is held and the gavel falls, assuming the sale is valid. In some jurisdictions a sale is not final until court confirmation; unless the fact pattern says otherwise, treat the right as ending at the sale itself.
In a strict foreclosure, a court sets a redemption deadline. If the mortgagor fails to pay by that date, the equity of redemption is cut off and title vests in the mortgagee without a sale.

Exam tip: If the question states that the sale has already occurred and is valid, you should assume the equity of redemption has been extinguished. At that point, only a statutory right of redemption (if any) may remain.

After the equity of redemption is extinguished, the mortgagor has no common law right to reclaim the property. Only a statutory right of redemption (if the state provides one) may survive.

Waiver of the Equity of Redemption

A core principle on the exam: the equity of redemption cannot be waived in the original mortgage transaction.

Any clause in the mortgage (or in a separate but contemporaneous instrument forming part of the same deal) stating that the mortgagor “waives all rights of redemption” if default occurs is void.
The same is true of provisions that, in substance, say the lender keeps the property automatically upon default, without foreclosure or the opportunity to redeem.

This is the classic “clogging” scenario.

Key Term: Deed in Lieu of Foreclosure
A post‑default agreement in which the mortgagor voluntarily conveys title to the mortgagee in full satisfaction of the mortgage debt, avoiding the need for a foreclosure sale.

However, the mortgagor can voluntarily give up the property after the mortgage has been created, in a separate, later transaction, so long as that later transaction is fair and not oppressive. Common examples:

Deed in lieu of foreclosure: The mortgagor deeds the property to the lender in full satisfaction of the debt. This is generally valid if entered into after default (or after distress) and not as part of the original mortgage bargain.
Post‑default sale: The mortgagor sells the property to the lender (or a third party) for fair value, using the proceeds to pay the mortgage.

Courts closely scrutinize these post‑creation arrangements for overreaching or unconscionability, but they are not automatically invalid.

Who Bears the Risk Between Default and Redemption

Before foreclosure, the mortgagor is still considered the owner. That means:

The mortgagor keeps any rents and profits from the property (unless the mortgage or state law gives the lender the right to take possession and collect rents).
The mortgagor also bears the risk of loss (e.g., fire damage) unless insurance or contract terms allocate the risk differently.

This flows from the same equitable conception: until foreclosure is properly carried out, the mortgagor is the equitable owner, subject to the mortgage.

If the mortgagor redeems:

The lender’s lien is discharged.
The mortgagor (or redeeming junior lienholder) ends up with title free of that mortgage, though other liens may remain.

Clogging the Equity of Redemption

Because courts treat the equity of redemption as essential to the mortgage relationship, they are suspicious of any term that effectively deprives the mortgagor of a realistic opportunity to redeem.

Clogging can be either direct (an explicit waiver) or indirect (additional benefits to the lender that make redemption practically impossible).

A key question in any MBE fact pattern: Is the challenged term part of the original mortgage transaction (or a contemporaneous agreement), or is it the result of a later, independent bargain? Clogging doctrine mainly targets the former.

Classic Examples of Clogging

Express waiver clauses: Example: “If Mortgagor is in default for 30 days, Mortgagor waives all rights of redemption.” This is a textbook invalid clog.
Redemption conditions that go beyond the debt: The mortgagor may be required to pay:
- Principal and interest, and
- Reasonable costs and fees caused by the default.
But provisions demanding large “extra” payments unrelated to the lender’s actual loss (e.g., a huge “bonus” or transfer of unrelated collateral as a condition of redemption) may be struck down as clogging.
Options in favor of the mortgagee tied to the loan: Suppose the lender receives, as part of the same transaction, an option to purchase the property at a fixed price significantly below likely market value, exercisable at or after default. Although labeled as an “option,” this can function as a way for the lender to capture the borrower’s equity if the property appreciates and is often treated as an invalid clog.
Disguised mortgage transactions: Sometimes the parties structure a transaction as an “absolute deed” with an option to repurchase, when in substance it is a loan secured by the property. Courts may recharacterize such arrangements as equitable mortgages and then apply the anti‑clogging rules.

Key Term: Absolute Deed as Security
A deed that is absolute in form (appearing to convey full title) but is given, in substance, only as security for a loan; courts may treat such an arrangement as an equitable mortgage and preserve the mortgagor’s right to redeem.

Factors suggesting an equitable mortgage include:

A large disparity between the “sale” price and actual value of the land.
The grantor remaining in possession and continuing to treat the property as owner.
An “option price” that looks like repayment of a loan plus interest.
The “buyer” taking no usual incidents of ownership (e.g., no assumption of property taxes).
Statements or documents describing the transaction as security.

In any of these situations, the court may conclude: “once a mortgage, always a mortgage”—the mortgagor retains a right to redeem the property upon payment of the debt, and any attempt to cut off that right in the original deal is invalid.

Worked Example 1.1

Mortgagor borrows $200,000 from Mortgagee, secured by a mortgage on Blackacre. The mortgage agreement includes a clause stating, “In the event of default, Mortgagor waives all right to redeem Blackacre.” Mortgagor defaults. Before the foreclosure sale, Mortgagor tenders the full $200,000 plus interest and costs to Mortgagee. Mortgagee refuses, citing the waiver clause. Can Mortgagor compel redemption?

Answer:
Yes. The clause attempting to waive the equity of redemption at the time the mortgage was created is an invalid attempt to clog the equity of redemption. Such clauses are void as against public policy. Mortgagor retains the equitable right to redeem by paying the full debt before the foreclosure sale.

Worked Example 1.2

Borrower needs funds and “sells” Whiteacre, worth $150,000, to Lender for $50,000 via an absolute deed. Contemporaneously, Lender grants Borrower an option to repurchase Whiteacre within one year for $60,000. Borrower fails to repurchase within the year. Lender claims full ownership. Borrower argues the transaction was a disguised mortgage and seeks to redeem. What result?

Answer:
A court is likely to construe this as an equitable mortgage, given the disparity between the property’s value and the “sale” price, the contemporaneous repurchase option, and the option price ($60,000) that looks like repayment of a $50,000 loan plus $10,000 interest. If deemed a mortgage, treating the repurchase option as the only chance to get the land back would improperly limit the equity of redemption period and clog Borrower’s rights. Borrower would have the right to redeem by paying the outstanding debt (and allowable costs) any time before a proper foreclosure.

Additional Clogging Scenarios

On the MBE, you may see more subtle versions of clogging. Evaluate both form and effect:

A clause giving the lender a share of future increases in property value as a condition of redemption can be a clog if it effectively confiscates the borrower’s equity.
A “sale‑leaseback” where the borrower sells the property to the lender and simultaneously leases it back, with a “non‑redeemable” option to purchase, may be treated as a mortgage if the economics show a loan secured by the land.

When dealing with an option or collateral advantage in favor of the lender, ask:

Was this benefit given as part of the original loan transaction?
Does it give the lender a way to capture the borrower’s equity in a way inconsistent with a normal mortgage?

If both answers are yes, courts are likely to treat the arrangement as a mortgage and strike down the extra term as an impermissible clog.

Worked Example 1.3

Owner borrows $300,000 from Bank, secured by a mortgage on Greenacre. As part of the same transaction, Owner also grants Bank an option to purchase Greenacre at any time within 5 years for $320,000. Greenacre is currently worth $300,000 but is in a rapidly appreciating area. Three years later, Greenacre is worth $500,000. Owner defaults, and instead of foreclosing, Bank attempts to exercise the purchase option for $320,000. Owner sues to block the option. Likely outcome?

Answer:
A court is likely to treat the option as an invalid clogging term. Because the option was granted as part of the original mortgage deal and allows the lender to capture most of Owner’s equity if the property appreciates, it functions as an attempt to defeat the equity of redemption. The court would likely characterize the arrangement as “once a mortgage, always a mortgage” and refuse to enforce the purchase option, preserving Owner’s right to redeem by paying the mortgage debt.

Who Bears the Risk Between Default and Redemption? (Overview)

Before foreclosure, the mortgagor is still considered the owner, so:

The mortgagor bears the risk of physical loss and continues paying property taxes.
The mortgagor enjoys any appreciation in value.
The lender is protected by the security interest and can foreclose if default continues.

Lenders may protect themselves further through covenants against waste and through insurance requirements. Courts will restrain mortgagors from committing voluntary or permissive waste that impairs the lender’s security.

Worked Example 1.4

Mortgagor gives Lender a mortgage containing an acceleration clause. Mortgagor misses three monthly payments. Lender accelerates the loan. Before the scheduled foreclosure sale, Mortgagor tenders only the three missed payments plus interest and late fees, but not the full accelerated balance. Lender refuses to cancel the sale. Has Mortgagor validly exercised the equity of redemption?

Answer:
No. Once the loan is validly accelerated, the amount “due” for purposes of equitable redemption is the entire outstanding loan balance, plus accrued interest and allowable costs. Tendering only the overdue installments is insufficient. Mortgagor has not effectively redeemed and foreclosure may proceed.

The Statutory Right of Redemption

Distinct from the equity of redemption, roughly half the states provide a statutory right of redemption, which operates after foreclosure is completed. The exact details vary by jurisdiction, but the MBE focuses on the common features and the contrast with equitable redemption.

Basic Operation

The statutory right of redemption arises only if and when a foreclosure sale has occurred.
It allows the mortgagor (and sometimes junior lienholders or others specified by statute) to redeem the property from the purchaser at the foreclosure sale, not from the original lender.
The redeeming party must typically pay:
- The foreclosure sale price, not the original debt amount, and
- Additional statutory amounts, usually including interest at a specified rate from the sale date and possibly certain taxes or costs incurred by the purchaser.

Key Term: Statutory Redemption Period
The fixed period after a foreclosure sale, set by state statute (for example, six months or one year), during which eligible parties may redeem the property by paying the foreclosure purchaser the sale price plus statutory additions.

The statutory scheme determines:

The length of the redemption period (commonly six months to one year, occasionally shorter or longer).
Who may redeem (e.g., mortgagor only; mortgagor and spouse; mortgagor and junior lienholders; sometimes tenants or judgment creditors).
What happens to possession and rents during the redemption period:
- In some states, the mortgagor remains in possession.
- In others, the purchaser takes possession but must account for rents and profits if the property is later redeemed.

Effect of Statutory Redemption

If the statutory right is validly exercised:

The foreclosure sale is effectively undone.
Title reverts to, or vests in, the party who redeems.
The purchaser at the sale receives the redemption payment (sale price plus statutory additions) in place of the property.

If the statutory period expires without redemption, the foreclosure purchaser’s title becomes final, and any remaining interests of the mortgagor are cut off.

Statutory redemption can also affect deficiency judgments.

Key Term: Deficiency Judgment
A personal judgment against the mortgagor for the difference between the outstanding mortgage debt and the foreclosure sale price if the sale proceeds are insufficient to satisfy the debt.

Some statutes provide that if the lender purchases at the foreclosure sale and later the mortgagor redeems by paying the sale price, the lender cannot also obtain a deficiency judgment, or that the mortgagor’s liability is limited. Follow the statutory description given in the fact pattern.

Availability and Waiver

Unlike the equity of redemption, the statutory right of redemption is purely a creature of statute:

Some states have no such right; in those states, once the foreclosure sale is complete and the equity of redemption is terminated, the mortgagor cannot redeem at all.
Other states allow the statutory right but may restrict its scope or duration.

On the MBE, unless the question mentions a statutory right of redemption or describes a jurisdiction that has one, do not assume it exists.

Whether a statutory right of redemption can be waived in advance depends on the statute. Many statutes either explicitly prohibit waiver or are construed to make advance waivers ineffective as contrary to public policy; others may allow waiver. If the problem is silent, focus on what the statute, as described in the fact pattern, allows.

Worked Example 1.5

In a state with a six‑month statutory right of redemption, Lender forecloses on Blackacre and Buyer purchases at the foreclosure sale for $300,000. The unpaid mortgage balance at the time of sale was $250,000. Four months later, Mortgagor wants to redeem under the statute. How much must Mortgagor tender?

Answer:
Mortgagor must pay the foreclosure sale price of $300,000, plus any additional amounts required by statute (typically interest on the sale price from the date of sale and certain costs or taxes paid by Buyer). The amount of the original mortgage debt ($250,000) is not the measure of statutory redemption; the key figure is the sale price.

Comparing Equitable and Statutory Redemption

Because the MBE loves contrasts, keep the following distinctions straight:

Source of right:
- Equity of redemption: Common law, implied in every mortgage.
- Statutory redemption: Exists only if state statute creates it.
Timing:
- Equitable: After default but before foreclosure sale (or strict foreclosure deadline).
- Statutory: After foreclosure sale, during the statutory period.
Amount to be paid:
- Equitable: Amount due on the loan (often the accelerated balance) plus interest and costs.
- Statutory: Purchase price at the foreclosure sale, plus statutory interest and costs.
Who is paid:
- Equitable: Payment is made to the mortgagee (lender) holding the lien.
- Statutory: Payment is made to the foreclosure purchaser (who may or may not be the lender).
Who can redeem:
- Equitable: Mortgagor, successors in interest, and junior lienholders.
- Statutory: Determined by statute; usually the mortgagor and possibly junior lienholders or other specified parties.

Worked Example 1.6

A state has both an equity of redemption and a six‑month statutory right of redemption. Lender forecloses on Debtor’s property, and at the foreclosure sale, Investor buys the property for $200,000. The unpaid mortgage balance was $220,000. Two weeks after the sale, Debtor learns about what happened and tenders $220,000 to Lender, demanding the property back under the equity of redemption. Lender refuses. Debtor then tenders $200,000 plus interest to Investor, within the six‑month statutory period. What is the likely result?

Answer:
Debtor’s attempt to redeem under the equity of redemption fails because that right terminated at the foreclosure sale. However, Debtor can redeem under the statutory right of redemption by paying the foreclosure purchaser (Investor) the sale price plus any statutorily required amounts within six months. Investor must convey title back to Debtor, and the foreclosure sale is effectively undone.

Redemption by Junior Lienors and Subrogation

Junior lienholders whose interests would be wiped out by foreclosure have strong incentives to redeem:

A junior lienholder can protect its position by paying the senior mortgage in full before foreclosure.
Upon doing so, the junior lienor is usually equitably subrogated to the senior mortgagee’s position, now holding that lien and its priority.

If the junior lienor later forecloses, it forecloses as the holder of the senior lien and can wipe out the now‑junior interests below it.

From an exam standpoint:

If a junior lienor redeems the senior mortgage, that does not resurrect the original mortgagor’s equity of redemption as against that senior lien. The mortgagor continues to owe money to the junior (now standing in the senior’s shoes), but not to the original senior.

Worked Example 1.7

Owner gives First Bank a mortgage on Blackacre for $300,000, then later gives Second Bank a junior mortgage for $50,000. Owner defaults on the First Bank loan. First Bank begins foreclosure. To protect its interest, Second Bank pays First Bank $290,000, the remaining balance. What is the effect?

Answer:
Second Bank has exercised the equity of redemption as to the senior mortgage. Second Bank is equitably subrogated to First Bank’s position: it now holds a senior lien for $290,000, plus its separate junior lien for $50,000 (unless the junior lien is treated as merged). In any later foreclosure, Second Bank will be treated as the holder of the senior mortgage it redeemed.

Statutory Redemption and Subsequent Purchasers

MBE questions may test what happens when the foreclosure purchaser sells the property again before the statutory period expires.

In many states, any subsequent purchaser takes subject to the mortgagor’s statutory right of redemption and can be forced to convey title if the property is redeemed.
Some statutes require that the mortgagor redeem from the current holder of title (whoever that is at the time of redemption), at a price calculated under the statute.

Read the statute described in the problem carefully; follow it rather than generalities if they conflict.

Worked Example 1.8

In a state with a one‑year statutory redemption period, Lender forecloses and bids in the property for $250,000 (the amount of the debt). Six months later, Lender sells the property to Buyer for $260,000. Ten months after the foreclosure sale, Borrower tenders the statutory redemption amount (sale price plus interest and costs). From whom must Borrower demand the deed?

Answer:
Borrower must redeem from the current owner of the property—Buyer—by paying the statutory redemption amount. Buyer takes subject to Borrower’s statutory redemption right and must convey title if Borrower properly redeems within the statutory period.

Exam Warning: Common Traps

A few patterns recur on MBE questions:

A clause in the original mortgage purporting to waive “all redemption rights” if the mortgagor defaults.
- Treat this as an invalid clog of the equity of redemption.
- Do not be distracted by language suggesting the mortgagor “agreed” or “bargained” for this waiver.
A transaction structured as an absolute deed with an option to repurchase, in which the price and terms suggest a secured loan.
- Analyze whether this is really an equitable mortgage.
- If yes, the grantor retains the equity of redemption, and any limitation on that right in the original arrangement is likely a clog.
A lender’s option to purchase the mortgaged property at a fixed price, made part of the original loan transaction.
- If the price is significantly below likely future value, and the option is exercisable after default, treat it as a likely clogging provision.
Confusing equitable and statutory redemption in timing and amount.
- Before foreclosure sale: think full debt → equity of redemption.
- After foreclosure sale in a statute state: think sale price → statutory redemption.
Assuming a statutory right of redemption in every state.
- Only apply statutory redemption if the question tells you that the jurisdiction recognizes it or clearly describes such a statute.
Treating a later, post‑default deed in lieu of foreclosure as automatically invalid.
- Remember that post‑creation, voluntary conveyances can be valid if they are fair and if the borrower is not coerced; they are scrutinized, but not automatically void.

Keeping these distinctions clear will help you quickly eliminate wrong answers and identify which right (if any) a mortgagor can invoke.

Key Point Checklist

This article has covered the following key knowledge points:

The equity of redemption is a common law right that allows the mortgagor (and certain others) to prevent foreclosure by paying the amount due (often the accelerated balance) plus interest and costs before a valid foreclosure sale or strict foreclosure deadline.
The equity of redemption cannot be waived or destroyed in the original mortgage transaction; any such attempt is called “clogging” the equity of redemption and is void as against public policy.
Clogging includes express waivers of redemption, oppressive financial conditions on redemption, certain collateral advantages to the mortgagee, and disguised “absolute deed plus option” transactions that function as mortgages.
The mortgagor may later give up the property in a separate, fair transaction—such as a deed in lieu of foreclosure—without violating the anti‑clogging rule.
An absolute deed given as security for a loan may be treated as an equitable mortgage, preserving the borrower’s equity of redemption despite the deed’s form.
Junior lienholders can redeem senior mortgages to protect their interests and are typically equitably subrogated to the senior mortgagee’s position upon doing so.
The statutory right of redemption is distinct from the equity of redemption, exists only if provided by state statute, and operates after the foreclosure sale by allowing redemption from the purchaser at the sale.
Statutory redemption generally requires payment of the foreclosure sale price (plus statutory interest and costs) within a defined period, whereas equitable redemption usually requires payment of the mortgage debt.
The statutory redemption period is fixed by statute and, if redemption is exercised within that period, the foreclosure sale is undone and title returns to the redeemer.
On the MBE, carefully distinguish pre‑sale equitable redemption from post‑sale statutory redemption in terms of timing, amount required, and who receives payment, and be prepared to spot invalid attempts to clog the equity of redemption.

Key Terms and Concepts

Equity of Redemption
Clogging the Equity of Redemption
Statutory Right of Redemption
Foreclosure by Sale
Strict Foreclosure
Deed in Lieu of Foreclosure
Junior Lienholder
Acceleration Clause
Reinstatement
Absolute Deed as Security
Statutory Redemption Period
Deficiency Judgment

Mortgages/security devices - Right to redeem and clogging th...