What is the clause in a note, mortgage, or trust deed that permits a lender to declare the entire unpaid sum due should the borrower default?

The correct answer is the acceleration clause. This clause plays a crucial role in protecting the lender's interests by allowing them to demand the full repayment of the outstanding loan balance upon the borrower's default. When a borrower fails to comply with the terms of the loan agreement, such as missing payments or breaching other contractual obligations, the acceleration clause enables the lender to take swift action, ensuring they can recover the remaining loan amount without waiting for the original repayment schedule to unfold.

In mortgage agreements, this clause is critical because it helps lenders mitigate their risk by providing a way to enforce the terms of the loan if the borrower is no longer able or willing to continue making payments. It acts as a safeguard for the lender, facilitating the recovery of funds that might otherwise be at risk due to the borrower’s default.

Other clauses mentioned do have specific functions. The due-on-sale clause, for example, allows lenders to demand full repayment if the borrower sells the property without permission. The prepayment penalty clause imposes fees for paying off the loan early, primarily to protect the lender's expected interest income. Lastly, the late charge clause applies a fee when payments are made after the due date, serving as a deterrent for late payments rather than addressing full payment demands in