Lenders can accelerate a mortgage payoff if the borrower violates the mortgage agreement by falling behind on payments. Acceleration means to try to recoup the loan prior to the originally agreed upon term, which is often 30 years. Usually, acceleration leads to foreclosure, with the lender attempting to get some money back by auctioning the property.
Attorney Bruce Bergman states on the LexisNexis legal website that a lender can accelerate when a borrower violates terms and the lender decides that any kind of intervention or modification would be inadequate or futile. The lender then declares that it wishes to sever the relationship and wants the balance on the loan. If the borrower cannot pay the balance, the lender can take the collateral (property) attached to the mortgage and sell it to get the money from the loan.
Steps to Acceleration
Different states have slightly different rules governing mortgages and foreclosures, and different lenders go about the business using a variety of tactics; however, many similarities exist. Generally, a lender can only accelerate the mortgage if the borrower violates the terms of the mortgage, which in nearly every case of acceleration means the borrower stops making payments.
Notice of Acceleration
After the third or fourth missed mortgage payment, the lender sends the borrower a Notice to Accelerate. The website Vision Credit Education claims that most states require lenders to send notices outlining what the borrower can do to prevent foreclosure (which is almost always to pay back payments and late fees in a lump sum within 30 days) and warns that acceleration generally leads to foreclosure if the borrower cannot pay. Bergman states that the notice is itself an official declaration of acceleration.
The foreclosure process involves the lender appointing an attorney, filing with the local courts and scheduling a sale through the sheriff’s office, all of which takes a matter of months. During this process, the borrower has a few chances to stop the foreclosure, the terms of which are either set out by state law or written into the mortgage contract. However, the longer the borrower waits, the more money he owes in back payments, late fees and attorney’s fees and the less willing the lender is to work with the borrower.