Adjustable Rate Mortgages - Quicken Loans Zing Blog

Generally, acceleration is one of the good words, I’d say. Accelerated courses get you through school faster. Accelerating your car 1) is fun and 2) gets you where you’re going faster. Accelerated restaurant service means you get your food faster. But, like most things in life, there’s two sides to the coin. If you’re talking about the acceleration clause in your mortgage, then no, faster is not better.

You’re probably familiar with what a foreclosure is – when a lender forecloses, or takes over, a home that they loaned money on. You may not be as familiar with the acceleration clause the lender invoked to begin that foreclosure process.

What Is an Acceleration Clause?

An acceleration clause means that, if certain conditions are met, the borrower will have to pay back the entire loan at once – including the interest that accrued since the clause was invoked. The borrower doesn’t have to pay the interest that would have accrued over the life of the loan, however.

See, when a mortgage is written, the client agrees to pay off the loan after a certain period of time, say 30 years, by paying a certain amount each month. If the borrower misses even one payment, then they have broken their promise, and the lender has the right to use the acceleration clause and begin the foreclosure process.

Sometimes the lender can invoke the acceleration clause for other things like failing to pay or canceling your homeowners insurance, not paying property taxes (and having a tax lien placed on your property) or not properly maintaining the property, but these don’t happen very often.

Usually, acceleration clauses don’t automatically trigger – the lender has to decide if they want to use it once all the conditions are met. Foreclosure is a lengthy process, and the lender ends up losing money in the end.

Can You Get Out of an Acceleration?

Losing your home in foreclosure is pretty unpleasant to think about. The good news is, the borrower is generally able to avoid acceleration by working out a loan modification or repayment plan with his or her lender to make up the delinquent payments; this is called mortgage reinstatement. Because lenders prefer not to own real estate, there are usually a variety of options available for borrowers to choose from to get back to being current on their loan payments. The borrower will sometimes have to pay some or all of the costs the lender incurred while dealing with the acceleration, however.

Keep in mind, mortgage acceleration and foreclosure guidelines and requirements vary by state and lender, so your exact situation will depend on those details.

Mortgage acceleration isn’t a fun topic to talk about, but it’s important that you understand it so you’ll know what to expect and what your options are, just in case. Do you have a question or concern that wasn’t answered here? Let us know, and we’ll be glad to help!

 

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This Post Has 21 Comments

  1. I have a home mortgage with Wells Fargo—-I filed bankruptcy in 2011, did not reaffirm and have made all payments! I have his a rough patch and can only make 1/2 payment this month leaving me a balance of 370.00, next month I plan on full payment and some extra towards the arrears. Will they take my home?
    Thanks!

    1. Hi Linda:

      The best advice I can give you is to talk to Wells Fargo. They can’t help you until they know there’s a problem. They’ll be able to go over the process and your options.

  2. I need a list of forclosure proceedings/steps taken that leads to foreclosure. Will someone call, send a certified letter..?

    1. Hi Beth:

      Different lenders have different policies regarding how they handle foreclosure. I’m going to suggest you speak with your servicer. That’s whoever you make your payments to. It may or may not be your original lender. They may be able to help you with solutions to help you avoid the drastic step that is foreclosure.

      Thanks,
      Kevin

  3. H II got a notice of loan acceleration notice a couple days ago, never got a foreclosure notice. Isn’t this strange? I tried to look up the company, which I have never heard of before – they are NOT my bank nor my bank’s lawyer. but they are not listed on bbbs site. I have a very convoluted mess as my husband and I are both on the loan, but my husband moved out and filed for divorce AND filed Chap13 bankruptcy “surrendering” the house back to the bank. An option that I do not agree with and so have been doing my best to pay the mortgage, but getting a little further behind each month. I want the house but got 5 payments behind due to the divorce, etc. In the mean time, there is a 401K that I am entitled to half of, and his divorce lawyer was supposed to be handing all that – he has had it for 8 weeks now and once it’s completed and we sign and they get the Judge’s signature’s it’s still about 2-3 months before I see the cash. It won’t be enough to pay off the entire loan, but it would be enough to catch up what I owe. I have no idea where to turn, but I need to say that If I could afford a lawyer I would have definitely just paid my mortgage each month. Since I received that acceleration notice (certified mail) does that mean I’m SOL? Or is it still possible to work with my bank?
    Last question – if I filed Chap 7 Bankruptcy would that in and of itself, “force” my bank to stop the acceleration and allow me to work with them to come up with a new payment arrangement to keep my house? or would it just put off the inevitable acceleration/foreclosure?
    Thank you – I know this is ames s

    1. Hi Jackie:

      I’m going to start by saying I’m not a lawyer either and the law is different sometimes depending on where you live.

      I don’t know how that works with your husband surrendering the house to the bank. It would seem to me that’s something you both have to sign off on if it’s a joint loan. However, as I said, it may depend on the law in your area. The other concern I have is that you can’t seem to find anything on the company that sent the letter notifying you of acceleration. I think the first thing to do is contact the lender and see if this is even legitimate. After that, you can work with them on next steps.

      Thanks,
      Kevin

  4. I was in foreclosure and reinstated my loan by paying all the arrears and catching up on payments and meeting all requirements momentarily. Once that was taken care of my mortgage company went back to the original starting loan amount, meaning everything I paid in the past 7 years had vanished. Basically they stole 7 years worth of payments. Is that a legal loan reinstatement or did they steal from me?

    1. Hi Jaime:

      It sounds like you have a bit of a complex situation. In terms of what’s legal and what isn’t, I really advise that you talk to a real estate attorney in your state.

      Thanks,
      Kevin Graham

  5. Our loan was accelerated on the 8th. We’re 5 months past due. I called today to pay the loan current, but the attorneys office said that they would e-mail the amount owed within 7 days and that amount would remain the same for 14 days! We live in Virginia and we did a modification last year! Can they make us pay the entire remainder of the loan?

    1. Hi Melanie:

      Unfortunately, depending on the terms of the loan agreement, they probably can. The only thing you can try to do is work out a repayment plan or some other agreement with them. I’m guessing you don’t have the money to pay it all off which would be understandable. If you speak with them, you can try to work out a repayment plan. Most creditors would rather see some money than no money at all.

      Kevin Graham

  6. I have mortgage loan with Wells Fargo. I recently lost my job and they put me on a forbearance plan for 3 months. During this time I tried to make at least half of my regular payment but the bank didn’t allow me to. They told me if I paid more than the amount on forbearance agreement it would be cancelled. Instead I should save my money to give me relief since I lost my job. Now that the forbearance plan has ended and I found a job. I called to pay my regular monthly mortgage payment and I was told that hey could no longer take my payment because I was behind more than 90 days. They could only accept payment of 5,367. Which is all the late fees principle escrow and etc…. I do not have that full amount and I can not lose my house. I currently have half of that amount and they won’t accept it. I don’t understand why? Now Wells Fargo is telling me that if I can’t pay the full amount, I need to apply for a loan modification or repayment plan but this can take an additional 30 days and I will only call more behind and time is on their side because they won’t accept my payments. I NEED HELP ASAP does any of this make sense? I feel like they want me to default on the loan and are not willing to work with me. Is there any way to get them to accept my payments so I can at least try to catch up? What is this forbearance plan for, if all it did was put me more than 90 days past due.

    1. Unfortunately, your best option might be to move forward with a modification. It’s going to be difficult to refinance if you’re 90 days past due. I would call and talk to them about the best way to get back on track. I’m sorry I can’t tell you more.

  7. I need help with a refinance with lousy credit. My mortgage loan has been accelerated. I have paid off $60000 and owe $101000. The home is worth at least $190000. I will be receiving $30000 before end of month to be used to keep home. Is there any help out there. Desperate

  8. My husband and I did a loan modification and then 3 months later they upped our mortgage by almost $1000 stating we owe money for various things. We clearly can’t afford it that’s why we did the loan modification to begin with. If we decide to walk away from our home, how long is the foreclosure process in the State of PA?

    1. Hi Kia:

      I’m sorry to hear about your situation. I’m going to have someone reach out that can help answer your question, but maybe they can also help go over your options and offer any advice they may have for helping you avoid foreclosure.

      Thanks,
      Kevin Graham

  9. my friend have a mortgage but could not pay anymore since his spouse died in 2006. his last payment was 2007 and he don’t know if his mortgage was accelerated during that time. the bank file the 1st time for a forecloser 2007 2nd 2011 and now 2016 did his acceleration begin.. or is the statute of limitation applies

    1. Hi Dahoo:

      I’m going to forward your comment to one of our Home Loan Experts in order to get your friend’s contact information so we can look into this situation. Thanks for reaching out!

      Thanks,
      Kevin

  10. We did a loan modification about 7 years ago when my husband was unemployed. A few months ago Bank of America sent us a letter that a page was missing- after looking at our records and comparing it turns out the supposed missing page is the page giving them the right to accelerate payments- they’ve even sent “a representative” to our house unannounced that is a notary to get my husband and me to sign papers regarding this! Seems very strange to both of us so we have yet to sign anything but feel maybe legal advice may be warranted. Ever heard of this before?

    1. Unfortunately, Renee, we would not be able to advise on this situation. To be safe, we do suggest you contact a lawyer to see what you are legally required to do. Best of luck to you and your situation!

  11. We own an apartment building that had a 1st, a 2nd and a 3rd. The 1st was paid off last week. The 2nd and 3rd was borrowed by us from our property manager and cousin and was tied to the apartment building for 4 years on a interest only loan. Now we want to combine the 2nd and 3rd creating a new 1st. with a fixed 5.125 interest rate for 7 years fully amoritized with him. He’s putting an acceleration clause in the escrow papers if we sell the building etc. But he’s also saying if we change property managers he can call the note. He would be paying himself out of the proceeds of the apartment, being the property manager.So it’s not a question of him getting his money. How long do you think we would have to get a new loan from a bank if he chose to use the acceleration clause.
    S

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