The right to cure letter can be considered a lifeline for borrowers facing loan delinquency. Reports show that as of 2023, about 2% of mortgages in the United States were in some stage of delinquency. The right to cure grants individuals the opportunity to settle overdue payments before a loan defaults completely, providing a crucial window to avoid foreclosure or repossession.
The lender's notice outlines the period allowed for rectifying arrears, a critical juncture detailed in the right to cure letter. Failure to comply with these terms can lead to severe financial consequences, including potential legal action to recover any remaining debt post-collateral sale. Understanding and acting upon the right to cure can be the decisive factor in maintaining one's financial stability.
After the period in which the borrower has the right to cure, the lender may repossess the item for which the loan was taken or institute foreclosure proceedings. If it is an item that has been purchased with the loan, the company has the right to take and sell the item. Typically, this is done through a public auction, but it may be done through a private sale. In either circumstance, the delinquent borrower has a right to know how and when the item will be disposed.
Once the sale is closed, the lender will apply the proceeds to the existing debt. In the event that the amount received from the sale does not completely cover the delinquent debt, called a “deficiency,” the lender may bring a deficiency action against the borrower. However, if the proceeds from the sale of the item cover the debt, the lender is to return any extra money to the borrower and he or she is cleared of the debt.