Pennsylvania homeowners have the right to “cure” a mortgage loan (i.e., pay off all arrears and reinstate the loan) up to one hour before the Sheriff Sale. (41 Pennsylvania Statutes Section 404).
Pennsylvania Law first created a statutory right to cure a mortgage default in 1974 by establishing Act 6, also known as the Loan Interest and Protection Law. By “cure,” the statute means a restoration of the mortgage “to the same position as if the default had not occurred.” Act 6 established the right to cure defaults up until one hour before a sheriff sale. (41 P.S. Section 404).
Act 6 was strengthened by Act 91 of 1983, which effectively extended the right to cure to most residential mortgages and established a state-operated revolving loan fund to provide funds sufficient to cure a default to those homeowners applying for assistance and meeting the program eligibility criteria of the Homeowners’ Emergency Mortgage Assistance Program (HEMAP).
Both laws were strengthened by the amendments in 2008 in response to the foreclosure crisis. The right to cure a mortgage default extends to one hour prior to the sheriff’s sale. (41 P.S. Section 404(a)). By virtue of the statutory right, the homeowner can challenge the judgment by:
(a) Filing a petition to strike and/or to open the judgment. A petition to strike a judgment “operates as a demurrer to the record and will only be granted for defects appearing on the face of the record.” A common example relates to “sewer service” where the record lacks evidence that the plaintiff complied with the pre-suit notice requirements of Act 6 or Act 91, or that the defendant was never served with the complaint, or where the complaint underlying the judgment lacked any allegation that the plaintiff obtained an assignment of the mortgage from the original mortgagee named in the mortgage.
(b) Filing a petition to open which relies on matters outside of the record and is addressed to the equitable powers of the court. It requires a party to make a three-part showing that (1) the petition had been filed promptly following the judgment, (2) the failure to appear in the case or file an answer was excusable, and (3) the petitioning defendant had a meritorious defense. Each of these three tests is liberally construed.
(c) Another option to cure a mortgage default is through a post-judgment chapter 13 bankruptcy proceeding. The filing of a bankruptcy petition produces an automatic stay of an execution sale that arises by operation of the Bankruptcy Code. Under chapter 13, debtors are required to file a plan for repayment of their debts, and the plan can provide for the curing of a mortgage default over a period of 3-5 years. Debtors commit a portion of future income to fund the proposed payments, submitting monthly payments to a “chapter 13 standing trustee” while maintaining their post-bankruptcy contractual mortgage payments. An ancillary benefit is that junior mortgages are subject to being “stripped down,” and other liens can be avoided in their entireity.