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What is a Notice of Acceleration?

On Behalf of | Jun 13, 2024 | BANKRUPTCY LAW - Foreclosure

Whether it’s called a Notice of Acceleration, a Notice of Default and Acceleration or something different, receiving this letter in the mail is a serious issue. 

It means that you’ve essentially triggered an acceleration clause in your mortgage by missing too many payments. The bank is now demanding full payment and threatening foreclosure.

What happens next?

Now that you’ve been formally notified that you’re in default on your loan and in breach of your contract with the lender, and the lender is looking to foreclose. 

In general, the notice you receive will tell you that you have the right to “cure” the default by making up all your missed payments (plus any late fees and penalties that have accumulated) by a specific date. That will “reinstate” your mortgage contract and put you back in good standing with the lender. Fail to do so, and the lender will “call your loan,” or demand you pay off your entire mortgage balance at once.

It may seem ridiculous for a lender to demand thousands of dollars in missed mortgage payments and fees when you’re clearly struggling financially. And, most people don’t have the resources to pay their loans off entirely, not even if they borrow from everybody they know. 

Whether you’ve fallen behind on your payments due to a job loss, an illness or some other reason, reinstatement isn’t likely to be a viable option – but a loan modification or a forbearance program can be. 

Forbearance lets you temporarily pause your mortgage payments altogether and can be appropriate if your financial situation seems like it will resolve in a few months. If your financial situation seems like it may be permanently changed, a loan modification can help you stay in your home by reducing your interest rate and payments. That’s often done by stretching out the length of the loan.

If you’ve received a Notice of Acceleration by any name, this is a critical moment. How you respond to the situation can have a drastic impact on your future. Successfully navigating a request for mortgage assistance or a loan modification without legal guidance can be nearly impossible.