Cognovit Clause

If a cognovit clause is inserted into a loan contract, the borrower effectively gives up his right to challenge a lender’s legal actions (concerning the debt) against him.

It is basically a pre-agreed acceptance of judgment on the part of the mortgagor.

A mortgagee would be able to place a lien against the defaulting debtor’s property as long as there is justification for these actions.

In the absence of a cognovit clause, a lender would have to take the borrower to court and obtain a judgment by proving that a breach of contract has occurred.

There would be no need to follow notification requirements as that is waived.

However, these clauses usually specify the jurisdiction of certain courts in which cognivit clause would be in effect.

Lenders understandably, would only find positive in having these provisions in the contracts.