CHAPTER 9.02. Acceleration

• Jurisdiction: United States

9.02. Acceleration

The right to accelerate a loan in default is a necessary remedy for the lender. There is no common law right to accelerate the debt payment. In the absence of the right to accelerate, the lender is only entitled to recover, whether by debt action or foreclosure, those portions of the debt that have then come due and remain unpaid. Acceleration of a mortgage loan is therefore primarily a matter of contract.

Prior to the acceleration, the borrower can cure the default that would otherwise allow the lender to accelerate.¹¹ Once the debt has been accelerated, the borrower cannot simply cure the default that triggered acceleration; the borrower must pay the entire accelerated debt to avoid foreclosure or other action by the lender.¹²

The lender electing to accelerate need not notify the borrower it is doing so unless required by the note or the mortgage. The mere filing of the foreclosure on the debt action for the accelerated amount is sufficient to effect the acceleration.¹³

Generally, a mortgage will provide that the lender may accelerate. In other words, acceleration does not occur automatically if a default occurs.¹⁴ In the absence of ipso facto acceleration in the mortgage, the lender only has a right to accelerate; acceleration has not yet occurred without some further action.¹⁵ The benefit to the borrower is obvious in that a technical default would otherwise trigger automatic acceleration. Likewise, a lender may not wish to have the accelerated loan automatically on its books because of a technical default. The only automatic, or ipso facto, default included in most mortgages is the occurrence of the borrower's voluntarily or involuntary bankruptcy or comparable proceeding. Of course, the Bankruptcy Code renders such an ipso facto default unenforceable against the debtor in bankruptcy.¹⁶

If acceleration is provided for in the mortgage and properly exercised, this accelerates the maturity of the debt under the note even if the note does not contain an acceleration clause.¹⁷ And merely allowing junior liens on the collateral contrary to a covenant in the mortgage is not a basis for foreclosure where the mortgagee was not injured in any way on account of the junior liens.¹⁸ However, some courts have also held that in that case, the acceleration under the mortgage allows foreclosure for the entire debt but does not accelerate the debt under the note for purposes of debtor's personal liability, such as for a deficiency.¹⁹

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