Question: I received a letter from my loan servicer telling me my loan has been “accelerated.” What does this mean?
Answer: After a borrower has defaulted on their mortgage loan, the lender has the option––under most mortgages––to demand that the borrower pay the full amount of the loan due. The demand is referred to as “acceleration” of the loan, and is often made through a written letter to the borrower. The borrower has the opportunity to pay the entire amount due or risk foreclosure. This amount due includes the principle, interest, and other outstanding debt. A borrower can avoid foreclosure if they are able to pay this debt, but generally, most borrowers in default are unable to do so. After acceleration, the lender has no obligation to accept loan payments from the borrower and instead, can foreclose.
Borrowers who have received an acceleration letter are not without options. Most servicers will still accept and review a loan modification after acceleration. Moreover, the lender still needs to provide the borrower with ample notice prior to the foreclosure. Homeowners who have received an acceleration letter should contact a lawyer right away to discuss their options.