Cross-Default Clauses
Posted on March 19, 2009 - Filed Under Reference |
Be careful with mortgage documents containing “cross-default” provisions that authorize a mortgagee to accelerate the mortgage obligation if any other mortgage on the real estate goes into default. The absence of an acceleration provision can have profoundly negative consequences for mortgages. In this setting, the mortgagee must either foreclose for each installment as it comes due or wait until the amortization period expires to foreclose for the full-accrued obligation. Both alternatives are cumbersome and impractical in most cases. However, in some rare instances, acceleration may be undesirable because the full mortgage obligation cannot yet be ascertained or because it represents an on-going business relationship that the mortgagee does not wish to disturb (Restatement Third, supra).
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