In a foreclosure claim, the lender usually has the right to file a lawsuit against the debtor in order to collect on past due payments in the event of default on the monthly mortgage payments.  In some cases, the lender has the right to collect on the entire mortgage amount in the case of default, not just on back.  This is usually accomplished through an acceleration clause in the mortgage contract.

Basically, the acceleration clause allows the mortgagor to collect on the entire loan amount in the event of a default on payments.  For example, if the mortgage loan is worth $8,000, and the borrower defaults, the lender can then file a claim in court to collect on the entire $8,000. 

Are Acceleration Clauses Required?

Acceleration clauses in a mortgage are generally not required by most state laws, and most state laws don’t prohibit them either.   In other words, like any other contract provision, the parties must consent to the acceleration clause in order for it to be enforceable.  Neither party can force the other to accept the terms of the acceleration clause. 

The acceleration clause is entered into voluntarily by the borrower.   Some clauses state specific details about enforcing the clause, such as a minimum number of default before the lender can collect on the entire amount.  While some feel that acceleration clauses are one-sided in favor of the lender, they are sometimes necessary to create incentives for the borrower to remain current on monthly mortgage payments.

What If a Mortgage Has No Acceleration Clause?

If a mortgage has no acceleration clause, the lender usually can’t attempt to claim the entire mortgage amount in the event of a default.  While this may happen depending on the circumstances, collecting on an entire mortgage is not very common without an acceleration clause. 

In the event of a default on a mortgage with no acceleration clause, the lender usually needs to resort to other methods, such as:

  • File a claim with the court to divide portions of the property and sell them in order to cover the lost payments
  • Wait to foreclose on the property until a later time
  • Request that the court sell the property subject to the mortgage, and have the sale proceeds go towards the missing payments  (also called “foreclosure by judicial sale”)

Thus, an acceleration clause can sometimes prevent more drastic measures such as selling the property, provided, of course, the borrower can come up with funds to pay for back payments.  In some cases the court or the mortgage lender may be willing to grant the borrower extra time in order to gather funds, thus allowing the borrower to keep their property subject to the mortgage.

Do I Need a Lawyer for Assistance With an Acceleration Clause?

Acceleration clauses can sometimes be complicated, and they can have far-reaching effects on a person’s property rights in the long run.  If you need assistance with an acceleration clause, you may wish to hire an experienced foreclosure lawyer for assistance.  Your attorney can help draft, review, or examine an acceleration clause so that your interests are properly reflected.  Also, in the event of a lawsuit or judicial proceeding, your attorney can provide you with legal representation in court.