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No Brakes: Loan Acceleration and Diminishing Foreclosure Defenses

Published onAug 07, 2022
No Brakes: Loan Acceleration and Diminishing Foreclosure Defenses

18 Wake Forest J. Bus. & Intell. Prop. L. 389

The high volume of foreclosures during and following the Great
Recession in the United States led to the revelation of many troubling
lending practices. It also led to problematic judicial decisions that
erode borrower protection by curtailing or eliminating procedural
requirements and substantive defenses with respect to foreclosure. This
Article examines the treatment of statute of limitation and res judicata
defenses after a loan has been accelerated following a borrower
default. Some courts ignore the traditional rule that acceleration under
a contract starts the clock for statute of limitation purposes or that
acceleration consolidates the loan instrument into a single obligation
as opposed to an installment obligation. Instead, these courts have
permitted lenders to accelerate loans repeatedly without triggering the
statute of limitations or res judicata defenses. Consequently, lenders
are permitted to assert foreclosure claims with respect to the same
underlying debt amount over and over again. Rather than being used
as a last resort, acceleration and the subsequent foreclosure process
can now be wielded as a significant threat to borrowers throughout the
life of their home loan. Consistent with favoritism demonstrated in our
prior research, we argue that creating exceptions for lenders in the
application of statutes of limitation and res judicata defenses provides
little incentive for banks and servicers to reform questionable lending
and collection practices.

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