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Old Republic Insurance Co. v. Lee

    Brief Fact Summary. The Lees, (Appellees), failed to make two loan payments on their second mortgage. Old Republic Insurance Co., (Appellant), the mortgage holder, notified Appellees that the mortgage was being declared in default and the unpaid balance was being accelerated. Appellant filed suit to foreclose but the court granted Appellees motion to reinstate.

    Synopsis of Rule of Law. Once the mortgage holder has exercised his option to accelerate, the right of the mortgagor to tender only the arrears is terminated.

    Facts. Appellant notified Appellees that they were in default on their second mortgage and the principal balance was being accelerated. Appellees sent Appellant a certified check for the two overdue payments and the next payment due. Appellant returned the check and filed suit to foreclose. Appellees moved to reinstate the mortgage. The court granted this motion finding that there was substantial equity in the property, the first mortgage was current, and the second mortgage would be paid from the proceeds of the Appellees’ proposed sale of the property.

    Issue. Whether the mortgagor had the right to prevent the mortgage holder from exercising his option to accelerate by tendering the arrears due.

    Held. No. This right terminates once the mortgage holder has exercised his option to accelerate.

    Points of Law - for Law School Success

    Specifically, courts will bar acceleration and foreclosure as follows: Foreclosure on an accelerated basis may be denied when the right to accelerate has been waived or the mortgagee estopped to assert it, because of conduct of the mortgagee from which the mortgagor (or owner holding subject to a mortgage) reasonably could assume that the mortgagee, for or upon a certain default, would not elect to declare the full mortgage indebtedness to be due and payable or foreclose therefore; or where the mortgagee failed to perform some duty upon which the exercise of his right to accelerate was conditioned; or where the mortgagor tenders payment of defaulted items, after the default but before notice of the mortgagee's election to accelerate has been given (by actual notice or by filing suit to foreclose for the full amount of the mortgage indebtedness) or where there was intent to make timely payment, and it was attempted, or steps taken to accomplish it, but nevertheless the payment was not made due to a misunderstanding or excusable neglect, coupled with some conduct of the mortgagee which in a measure contributed to the failure to pay when due or within the grace period.

    View Full Point of Law
    Discussion. The mortgagor upon the occurrence of a default may tender the arrears due and thereby prevent the mortgage holder form exercising his option to accelerate. However, once the mortgage holder has exercised his option to accelerate, the right of the mortgagor to tender only the arrears is terminated.


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