A California borrower has a deed of trust with an acceleration clause. The borrower misses three consecutive monthly payments. What does the acceleration clause allow the beneficiary to do?
Correct Answer
B) Declare the entire remaining loan balance due and payable immediately
An acceleration clause gives the beneficiary the right to declare the entire unpaid loan balance due and payable immediately upon default. If the borrower cannot pay the full balance, the beneficiary can then initiate foreclosure proceedings.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
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