If the lender decides to grant a mortgage, the mortgagor signs two critical documents at the closing: the note and the mortgage. It is enough here to recall that in a note (really a type of IOU), the mortgagor promises to pay a specified principal sum, plus interest, by a certain date or dates. The note is the underlying obligation for which the mortgage serves as security. Without the note, the mortgagee would have an empty document, since the mortgage would secure nothing. Without a mortgage, a note is still quite valid, evidencing the debtor’s personal obligation.
One particular provision that usually appears in both mortgages and the underlying notes is the acceleration clause. This provides that if a debtor should default on any particular payment, the entire principal and interest will become due immediately at the lender’s option. Why an acceleration clause? Without it, the lender would be powerless to foreclose the entire mortgage when the mortgagor defaulted but would have to wait until the expiration of the note’s term. Although the acceleration clause is routine, it will not be enforced unless the mortgagee acts in an equitable and fair manner. The problem arises where the mortgagor’s default was the result of some unconscionable conduct of the mortgagee, such as representing to the mortgagee that she might take a sixty-day “holiday” from having to make payments. In Paul H. Cherry v. Chase Manhattan Mortgage Group ( Cases ), the equitable powers of the court were invoked to prevent acceleration.
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