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Re: Due on sale clauses—no problem

Posted by Ward-CA- on August 05, 2001 at 10:49 AM

In Reply to: due on sale clauses posted by Gary - CA on August 04, 2001 at 11:25 PM

: Ward,

: If you are buying from an owner before the foreclosure sale, is it true that an alienation or acceleration clause can allow a lender to begin a foreclosure action against you if they become aware that you have purchased the property? If so, have you ever seen it happen?

: Also, is it possible to request from the lender in writing not to accelerate the loan if you buy the property from the seller and bring the payments up-to-date?

: -Gary

=•=•=•=•=•=•=•=•=•=•=•=

Gary, since the federal landmark regulation of the Depository Institutions Act of 1982 co-sponsored by Senators Jake Garn and Fernan St. Germain, we have had to deal with the “due on sale” clause in our trust deeds and mortgages all across the United States, regardless of the attitudes and customs of individual states.

While it doesn’t happen too often, I have seen lenders enforce their “due on sale” rights. I guess you could request the senior lender to refrain from enforcing their “due on” rights prior to you becoming the winning bidder at the foreclosure sale, but I think they’d tell you to wait and see if you actually end up being the winning bidder. And then they’d want to enter into a formal, written assumption agreement with you—after you’ve qualified creditwise and have paid an assumption fee of 2% of the original loan balance plus a flat fee of $200 dollars.

Because of the time, aggravation, personal liability and expense involved, I don’t see why anyone would voluntarily initiate such a process, especially when it’s so simple to use a title holding trust to sidestep the issue entirely, with surprisingly little effort and time.



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