The debtor did tender payment of the full arrearage and late payment fees to the bank, however, prior to his tendering payment of the arrearage, and unbeknownst to the debtor, the bank internally accelerated the entire balance, which was then more than $18,000.

The bank proceeded with a foreclosure action against debtor, even though debtor timely made the next loan payment.

In response to the foreclosure action, debtor filed a motion to quash the action based upon the fact that the bank did not notify debtor of its decision to accelerate the balance owing.

The bank relied upon language in the loan documentation that stated it had the right to declare the entire unpaid debt immediately due and payable without giving the debtor any advance notice.

The court, however, held that after the bank’s notice to debtor requiring the arrearage to be cured, the bank was obligated to take some clear and unequivocal action indicating its intent to accelerate the balance. Hence, the court held the acceleration was a nullity and without any effect.

Author: Charles R. Harroun, Attorney at Law