Accelerating a loan isn't as simple as declaring default. Lenders must anticipate challenges like uncooperative Servicers, legal delays, and collection freezes. Plan ahead, structure remedies, and ensure clear strategies for enforcement and recovery to avoid costly mistakes.
Accelerating a loan sounds simple on paper—declare a default, send a notice, and demand payment. But if you've ever handled a warehouse financing, you know it's anything but straightforward. When things go south, the last thing you want is to be stuck in a legal and operational mess, watching collections stall while the Servicer takes its sweet time “cooperating”.
So, before you hit that acceleration button, here’s your insider guide to making sure you don’t just declare default—you actually get paid.
1. If You Think The Originator/Servicer Will Cooperate… Think Again.
One of the biggest mistakes lenders make is assuming that once they accelerate, the Originator (in its capacity as Servicer) will continue collecting and forwarding payments as usual. Wrong. The moment acceleration happens, expect:
What to do instead: Plan ahead. Assume zero cooperation from the servicer and structure your remedies accordingly.
2. Moving Too Fast or Too Slow—Both Are Costly
Lenders either wait too long to accelerate or pull the trigger too soon without thinking about practical enforcement. A default notice is easy. Actually getting your money back? Not so much.
What to do instead: Have a pre-acceleration checklist ready. Talk to your litigation and deal structuring teams before accelerating.
3. Know Your Strategic Endgame: Are You Chasing the Servicer or the Obligors?
Acceleration gives you legal rights, but who should you actually go after?
What to do instead: Identify the most practical enforcement route before accelerating.
4. Warehouse Loans Are Not Like Other Loans—Unique Hurdles Await
Unlike traditional secured loans, warehouse financings rely on a complex structure of Trusts, collection accounts, and servicers and backup servicers. Once a default happens:
What to do instead: Anticipate Trust mechanics, servicer replacements, and legal bottlenecks.
5. What’s Your Emergency Servicer Plan? (Because You’ll Need One)
If the Servicer isn’t cooperating, you need a Backup Servicer ready to step in. But here’s the issue:
What to do instead: Have a pre-approved Servicer replacement plan baked into your agreements before default happens.
6. Contractual Remedies Are Nice… But Practical Execution Matters More.
Your financing documents probably say you can:
But what happens when the Servicer refuses to step aside? Or worse, when funds are legally trapped due to an injunction?
What to do instead: Understand that real-world enforcement is different from legal theory. Work closely with your litigation and structuring teams before making a move.
7. The Servicer Is Still Collecting? You’re Already Losing.
If a defaulted Servicer is still handling collections, that’s a red flag. Once acceleration happens, control over cash flows should be immediately redirected.
What to do instead: Establish a clear takeover strategy for collections.
8. Injunctions Can Be Your Worst Enemy—Or Your Best Tool
If the courts freeze enforcement, you need a solid game plan. Consider:
What to do instead: Work with litigation teams early to assess potential injunction risks before accelerating.
9. Acceleration Without a Recovery Plan Is Just a Lawsuit Waiting to Happen
Declaring default and demanding payment doesn’t mean you’ll get paid. What’s your real endgame?
What to do instead: Always connect acceleration with a clear recovery strategy.
Final Thoughts: Accelerate Smart, Not Just Fast
Acceleration isn’t just about pressing a button—it’s about ensuring you actually get your money back. By preparing in advance, structuring the right remedies, and anticipating worst-case scenarios, you can avoid costly mistakes and maximize recoveries.
Before you accelerate, ask yourself: Are you moving toward a resolution…or just triggering a legal battle?
Want to discuss your structured financing strategy? Let’s talk.
Accelerating a loan sounds simple on paper—declare a default, send a notice, and demand payment. But if you've ever handled a warehouse financing, you know it's anything but straightforward. When things go south, the last thing you want is to be stuck in a legal and operational mess, watching collections stall while the Servicer takes its sweet time “cooperating”.
So, before you hit that acceleration button, here’s your insider guide to making sure you don’t just declare default—you actually get paid.
1. If You Think The Originator/Servicer Will Cooperate… Think Again.
One of the biggest mistakes lenders make is assuming that once they accelerate, the Originator (in its capacity as Servicer) will continue collecting and forwarding payments as usual. Wrong. The moment acceleration happens, expect:
What to do instead: Plan ahead. Assume zero cooperation from the servicer and structure your remedies accordingly.
2. Moving Too Fast or Too Slow—Both Are Costly
Lenders either wait too long to accelerate or pull the trigger too soon without thinking about practical enforcement. A default notice is easy. Actually getting your money back? Not so much.
What to do instead: Have a pre-acceleration checklist ready. Talk to your litigation and deal structuring teams before accelerating.
3. Know Your Strategic Endgame: Are You Chasing the Servicer or the Obligors?
Acceleration gives you legal rights, but who should you actually go after?
What to do instead: Identify the most practical enforcement route before accelerating.
4. Warehouse Loans Are Not Like Other Loans—Unique Hurdles Await
Unlike traditional secured loans, warehouse financings rely on a complex structure of Trusts, collection accounts, and servicers and backup servicers. Once a default happens:
What to do instead: Anticipate Trust mechanics, servicer replacements, and legal bottlenecks.
5. What’s Your Emergency Servicer Plan? (Because You’ll Need One)
If the Servicer isn’t cooperating, you need a Backup Servicer ready to step in. But here’s the issue:
What to do instead: Have a pre-approved Servicer replacement plan baked into your agreements before default happens.
6. Contractual Remedies Are Nice… But Practical Execution Matters More.
Your financing documents probably say you can:
But what happens when the Servicer refuses to step aside? Or worse, when funds are legally trapped due to an injunction?
What to do instead: Understand that real-world enforcement is different from legal theory. Work closely with your litigation and structuring teams before making a move.
7. The Servicer Is Still Collecting? You’re Already Losing.
If a defaulted Servicer is still handling collections, that’s a red flag. Once acceleration happens, control over cash flows should be immediately redirected.
What to do instead: Establish a clear takeover strategy for collections.
8. Injunctions Can Be Your Worst Enemy—Or Your Best Tool
If the courts freeze enforcement, you need a solid game plan. Consider:
What to do instead: Work with litigation teams early to assess potential injunction risks before accelerating.
9. Acceleration Without a Recovery Plan Is Just a Lawsuit Waiting to Happen
Declaring default and demanding payment doesn’t mean you’ll get paid. What’s your real endgame?
What to do instead: Always connect acceleration with a clear recovery strategy.
Final Thoughts: Accelerate Smart, Not Just Fast
Acceleration isn’t just about pressing a button—it’s about ensuring you actually get your money back. By preparing in advance, structuring the right remedies, and anticipating worst-case scenarios, you can avoid costly mistakes and maximize recoveries.
Before you accelerate, ask yourself: Are you moving toward a resolution…or just triggering a legal battle?
Want to discuss your structured financing strategy? Let’s talk.
