Final answer:
The concept that allows a borrower to repay the loan and retain possession of a property after default, but before foreclosure, is known as the equity of redemption. This right is limited in time and acknowledges the borrower as the true owner.
Step-by-step explanation:
The concept described in the student's question refers to the equity of redemption. This is a legal principle in property and mortgage law that gives a borrower the right to redeem their real property after a default on the mortgage but before their right to redemption is cut off, usually through foreclosure. Despite the default, the borrower retains the right to pay off the debt within a specified period of time and reclaim their property, re-establishing their full ownership rights. It acknowledges that the borrower is the true owner of the property, although the lender has certain rights due to providing the loan.
For example, if a homeowner falls behind on their mortgage payments and defaults, the equity of redemption allows them to pay back what is owed, plus any interest and fees, to regain control of their home without the fear of immediate foreclosure. This right is only available for a certain duration, which is typically set forth by state law.