Check the mortgage or deed of trust that you signed when you took out the loan to get detailed information about your right, if any, to reinstate the loan. To reinstate, you'll have to pay the lender all of the overdue amounts as if no acceleration had occurred, cure any other kind of default, and pay all expenses that the lender incurred in enforcing the contract , like:.
The lender might require you to make a reinstatement payment with a money order, certified check, bank check, cashier's check, or electronic funds transfer. After you reinstate, the mortgage or deed of trust, and your obligations under it, remain fully effective as if no acceleration had occurred.
Depending on state law and the circumstances, once the loan is accelerated and if you don't reinstate or take other steps to stop the process , the lender will either:.
After the lender fulfills all of the legal requirements for foreclosure, the home is sold to a new owner at a public sale, often the foreclosing lender. With judicial foreclosures, a sheriff's sale is customarily used as this last step in the foreclosure process. In nonjudicial foreclosures, trustee's sales are common.
The successful bidder at the auction becomes the new owner of the property, and the proceeds go toward paying off the loan. If you can't keep up with your mortgage payments, notify your loan servicer immediately to find out what kind of options are available to you. If your loan has been accelerated and you're facing a foreclosure, consider talking to a foreclosure lawyer to learn whether you might have any available defenses and to learn about the different loss mitigation options that might be appropriate for your situation.
If you can't afford a lawyer, a HUD-approved housing counselor is an excellent free resource, especially for information about different ways to avoid a foreclosure. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site.
The attorney listings on this site are paid attorney advertising. In some states, the information on this website may be considered a lawyer referral service. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. Grow Your Legal Practice. Many debt instruments contain acceleration clauses, but they are most common in the real estate industry. Since most mortgages involve large sums of money, acceleration clauses protect lenders when borrowers miss payments or break any covenants defined in the mortgage.
If you miss payments and default on your mortgage, your lender can initiate the acceleration clause, requiring you to pay the principal and interest owed on the loan immediately.
It is up to the lender to decide whether or not to invoke its right to use the acceleration clause. However, lenders may lose the right to accelerate a mortgage if you correct the problem before the lender initiates the clause. If you transfer any interests in your property to another party without prior written consent from your lender, it can exercise the acceleration clause.
If a lender accelerates a loan, the borrower has to immediately pay the entire balance of the loan, not just the current due payment.
To obtain this right, the lender must include a loan acceleration clause in the lending document. Using an acceleration clause costs the lender interest income. When the lender demands immediate payment, the lender has the right to collect any interest on the loan that the borrower currently owes, but the lender loses the right to receive future interest payments.
The lender loses much more interest income on a new loan because earlier payments are mostly interest, and later payments are primarily principal. Using an acceleration clause is risky for the lender. The borrower usually doesn't have enough cash available to pay off the full loan balance immediately. These types of clauses may not be triggered if property ownership transfers because the borrower died and the property passed to his heirs. Due-on-sale and due-on-transfer clauses are regulated by the federal Garn-St.
Germain Depository Institutions Act of The act only affects mortgages of real property. Parties may waive their rights to invoke acceleration clauses by either entering into an express agreement or through the contract doctrine of reliance. Home mortgage acceleration clauses are designed to trigger in situations where the mortgagee might want to foreclose on the mortgage.
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