If a borrower defaults and the mortgage includes an acceleration clause, what action can the lender take?

When a mortgage includes an acceleration clause, it is a provision that allows the lender to demand the total outstanding balance of the loan if the borrower defaults on the agreement. In the event of default, the lender can invoke this clause to accelerate the repayment process, meaning that instead of just collecting overdue payments, the lender can require the borrower to pay the entire remaining balance of the loan immediately.

This action is significant because it places pressure on the borrower to settle their debt in full without allowing them the chance to make up missed payments over time. It’s primarily designed to protect the lender's interests by enabling quicker recourse if a borrower fails to adhere to the payment schedule.

While starting foreclosure proceedings is a possible action for a lender in the event of default, the acceleration clause specifically gives the lender the right to demand the full amount owed before moving to foreclosure. Modifying the mortgage terms or offering a repayment plan could be alternatives the lender might consider, but they do not directly arise from the activation of the acceleration clause, which focuses on the demand for full repayment.