Due On Sale Clause Flashcards
What is the general rule for due-on-sale clause?
Pursuant to federal law, a mortgagee-lender is generally entitled to enforce a clause, that accelerates the mortgagor-borrower’s loan obligation upon transfer of the mortgages property.
• if the mortgagor fails to pay the full amount of the outstanding loan obligation upon the demand by the lender, the lender may declare the loan in default and proceed to foreclose one it’s mortgage.
What is the residential real property exemption for living trust?
Transfers by the borrower to her living trust is exempted
What is the residential real property exemption for to a spouse or child?
Transfers to an ex spouse due to a divorce does not violate The acceleration clause.
When is the right of first refusal valid under the reasonableness standard?
A provision is valid if it complies with the statute of fraud’s and the terms are reasonable.
• under the reasonableness standard, the utility of the purpose served by the restraint is balanced against the likely harm that would result from its enforcement.
What is the right of first refusal?
A presumptive right that gives its holder the opportunity to acquire property before it is transferred to another.
What interest does a foreclosure sale extinguish?
A foreclosure sale extinguishes the mortgage interest being foreclosed upon.
What is a due-on-encumbrance clause?
Gives the lender the right to accelerate a mortgage obligations upon the mortgagor obtaining a second mortgage or otherwise encumbering the property.
• The lender can demand immediate payment of the full amount of the outstanding obligation, including interest.
