When you fail to pay your mortgage as scheduled, your mortgage company can ask for a full payment of the note to avoid foreclosure. By repaying the total balance due on a home-loan promissory note, you essentially pay off the debt and thereby prevent the bank from taking your home. Borrowers in financial straits, however, are unlikely to have the means to repay a home-loan debt in full -- considering they're already unable to make a monthly payment -- and usually end up either working something out with the lender to catch up on payments or losing the house.
Most home loan mortgage contracts include an acceleration clause as part of the promissory note. It allows the lender to accelerate the due date of the full loan balance, including unpaid principal and interest, attorney fees, administrative costs, late fees and penalties on the defaulted loan. The terms usually say a lender can accelerate the loan balance after one or two missed payments, although lenders typically begin preforeclosure -- the first stage of the foreclosure process -- after at least three missed payments.
Notification of Acceleration
A lender foreclosing on a one- to four-unit home in California must notify the borrower that it intends to accelerate the loan. A notice of acceleration from your lender lets you know that all mortgage payments needed to pay off the debt are due within the next 30 to 90 days. The acceleration notice is sometimes referred to as a "notice of intent to foreclose." In California, lenders must send the acceleration notice at least 30 days before starting the foreclosure process, giving borrowers time to find a solution.
If you can come up with the past-due amount, the lender might de-accelerate the loan through a loan reinstatement. In this case, you don't have to come up with the full loan balance anymore, but rather the amount you are behind in payments -- and possibly penalties -- to bring the loan current. After a reinstatement, you continue to make payments according to the schedule in your original loan agreement. Lenders typically require you to prove you have the means to continue making payments before agreeing to a loan reinstatement.
You can redeem your home up until five days before the lender sells it at auction. A borrower's right of redemption in California differs from that of borrowers in other states, in which lenders must go through the courts to foreclose. The right of redemption before the foreclosure sale gives you one last chance to save your home. The lender accepts no less than the underlying mortgage debt, plus penalties to stop the foreclosure sale.
- Nolo: Acceleration Clause
- 4hb.com: Promissory Note Installment With Acceleration Clause
- LexisNexis: Legal Newsroom -- Notice of Acceleration
- San Diego Housing Solutions: California Nonjudicial Foreclosures
- Stop Foreclosure Fraud: What Is a Notice of Acceleration?
- California Association of Realtors: Foreclosure Timeline for Lenders
- Nolo: Right of Redemption Before Foreclosure
K.C. Hernandez has covered real estate topics since 2009. She is a licensed real estate salesperson in San Diego since 2004. Her articles have appeared in community newspapers but her work is mostly online. Hernandez has a Bachelor of Arts in English from UCLA and works as the real estate expert for Demand Media Studios.