When a borrower defaults on a mortgage containing an acceleration clause, what can the lender do?

When a borrower defaults on a mortgage containing an acceleration clause, the lender has the right to demand immediate payment of the entire note. An acceleration clause is a provision in a loan agreement that allows the lender to require the borrower to repay the full balance of the loan if certain conditions are met, typically including defaulting on the mortgage payments. This means that once a borrower fails to make the required payments, the lender can invoke this clause to accelerate the repayment schedule, making the entire outstanding loan amount due immediately.

This capability serves as a protective measure for lenders, allowing them to address the risk associated with a default quickly. It is important for borrowers to understand the implications of such clauses when they enter into mortgage agreements, as they can significantly impact their financial obligation if they experience difficulties in fulfilling their payment commitments.

While alternatives like foreclosure proceedings or loan modifications may become relevant later in the process, the critical action taken immediately after a default, due to the acceleration clause, is the demand for full repayment of the note. Adjusting interest rates typically falls outside the immediate response options connected to a default situation.