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A farmer owns Greenacre, a tract of unimproved land. The farmer has mortgaged Greenacre to a local bank for $200,000 on a 30-year note. The mortgage payments are $1,000 per month, due on the first day of each month. The applicable law follows the title theory of mortgages. The applicable law does not provide for statutory redemption.
The mortgage instrument states that the bank may declare a default if the farmer fails to make payment for four or more consecutive months. The mortgage also includes the following provision:
Redemption: If Mortgagee initiates foreclosure proceedings, Mortgagor shall have five (5) calendar days to redeem the property, after which Mortgagor shall have no right of redemption.
Finally, the mortgage contains an acceleration clause, which provides that upon default by the mortgagor, the mortgagee may declare that the entire balance of the mortgage is due.
In the sixth year of the mortgage, the farmer fails to make the required payments from January 1 through June 1. The bank properly declares a default on June 2. At the same time, the bank invokes the acceleration clause to declare that the entire loan balance of $180,000 is due. The bank also demands immediate possession of Greenacre. The farmer refuses to give up possession, and the bank files an ejectment action against the farmer.
While the ejectment action is pending, the bank initiates foreclosure proceedings in compliance with applicable law. The foreclosure sale is scheduled for September 1. On August 31, the farmer tenders $9,000 to the bank, explaining that this will bring the farmer current on the mortgage payments, including the September 1 payment. The bank refuses the tender, citing the redemption clause in the mortgage. The bank then buys Greenacre at the foreclosure sale for $180,000.
Following this purchase, the bank makes no improvements on the property. On November 1, the farmer tenders $180,000 to the bank in exchange for Greenacre. The bank refuses this tender, as well.