What does "Right to Cure" Mean?

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.

The 'right to cure' refers to a legal opportunity given to a party who has breached a contract to resolve the breach within a specified period. This right allows the defaulting party to fix the issue, often by paying the overdue amount or performing a specific obligation, before the other party can pursue further legal action or terminate the agreement. It's designed to mitigate damages and give a second chance to uphold the contract's terms.

The 'right to cure' benefits the non-breaching party by potentially avoiding costly and time-consuming legal disputes, while the defaulting party receives an opportunity to rectify their mistake without facing immediate penalties or legal consequences. This provision encourages communication and cooperation, aiming to preserve the business relationship and the contract's original intent. It's a pragmatic approach that emphasizes problem-solving over punishment.

No, the 'right to cure' is not universally applicable. Its inclusion and specific terms depend on the type of contract and the governing law. Some contracts may explicitly include a 'right to cure' clause, while others might be governed by statutes that provide this right, such as the Uniform Commercial Code (UCC) for sales of goods in the United States. However, certain contracts, like those involving unique personal services, may not allow for curing a breach.

If a party fails to exercise their 'right to cure' within the specified timeframe, they may lose the opportunity to remedy the breach and face the consequences outlined in the contract or by applicable law. This could include the other party seeking damages, terminating the contract, or pursuing other remedies available to them. The defaulting party's failure to cure can also weaken their position in any subsequent legal proceedings.

Yes, a 'right to cure' period can sometimes be extended or renegotiated if both parties agree. This may occur if the defaulting party needs more time to address the breach and the non-breaching party is willing to grant an extension. Such modifications should be documented in writing to avoid future disputes. However, there's no obligation for the non-breaching party to agree to an extension, and they can insist on adherence to the original terms.