Your mortgage is a thick, dense, practically unreadable document that dictates many of the terms of the relationship between the borrower and the lender on a typical home loan. The document itself is written by the bank’s lawyers, and most of them tend to use specific language that has been tried-and-true in other deals. In other words, most mortgage contracts are cobbled together from boilerplate that appears in loan after loan after loan, almost all of it meant to protect the lender’s interest.
But even though these contracts are put together by the lenders’ lawyers, there are a few items in there that work to the borrower’s advantage. One of these: the Acceleration and Remedies Clause. In many Florida mortgages, you’ll find it in Paragraph 22 of the mortgage. Here’s an example:
22. Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 unless applicable law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceeding and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to to assert in the foreclosure proceeding the non-existence of a default or any other defense of Borrower to acceleration and foreclosure. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may foreclosure this Security Instrument by judicial proceeding. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Section 22, including, but not limited to, reasonable attorneys’ fees and costs of title evidence.
How does this language protect you? By imposing certain pre-conditions – lawyers call them “conditions precedent” on the lender – certain things that must be accomplished before the lender accelerates or forecloses.
Before we get to the specific conditions, we need to be clear on what “acceleration” means. Because mortgage loans are typically paid off over time, in installments, the full amount of the mortgage is not due until the very end of the loan. However, if the borrower misses a few payments, or breaks the agreement with the lender in some other way, the lender typically has the option to “accelerate” the loan – make the entire amount of the loan due immediately. Without acceleration, the lender can only demand those amounts which have already been due and not paid – usually only a fraction of the total amount loaned. And if the lender can’t recover all or most of what is has lent out, there’s no point in foreclosing. Hence, the acceleration right.
Notice: the form and contents
But before the lender can accelerate the loan, it first has to fulfill its duties under the Acceleration and Remedies paragraph – in this case, Section 22. The lender has to send the borrower a written notice that the borrower is in default and then give the borrower a chance to fix the problem – a chance known as the Right to Cure.
What must the notice say? It’s all set out in the mortgage:
(a) the default;
(b) the action required to cure the default;
(c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and
(d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property.
The notice shall further inform Borrower of the right to reinstate after acceleration and the right to to assert in the foreclosure proceeding the non-existence of a default or any other defense of Borrower to acceleration and foreclosure.
So it the notice must tell you, the borrower:
(a) what went wrong;
(b) how to fix it;
(c) when it must be fixed, giving at least 30 days
(d) what happens if you don’t fix the problem – acceleration, foreclosure and sale of the home;
(e) that you have the right to fight back.
If the lender fails to give this notice, fails to give it more than 30 days before acceleration, or the notice is missing any of these essential parts, they do not have the right to accelerate, and they do not have the right to foreclose.