Acceleration clause or due-on-sale is known as a provision in a mortgage document. It is a contractual right and not a law and it allows the lender the right to demand payment of the remaining balance of the loan when the property is sold.
2. Acceleration clause or due-on-sale is known as a provision in a mortgage document. It is a contractual right and not a law and it allows the lender the right to demand payment of the remaining balance of the loan when the property is sold. It generally implies that if a person transfers the title to the property, the bank has the liberty to decide when to call the loan due.
3. The loans available in the market nowadays have the ‘standard’ due-on-sale clause which usually reads something like "If all or any part of the property herein is transferred without the lender’s prior written consent, the lender may require all sums secured hereby immediately due and payable."
4. Bill Bronchick in his coaching mentions that many people are usually under the false impression of transferring title to a property which is secured by a “due-on-sale” mortgage is illegal. It is mainly because many people simply confuse civil liability with criminal liability.
5. To come under the illegal category, one must be in violation of a criminal law, code of statute. In case a lender discovers the transfer, they may call the loan due or payable anytime and if it is not paid, the lender has the option of commencing foreclosure proceedings. Bill Bronchick exclaims in his coaching classes, “so the real question is- are you willing to take a property subject to a mortgage containing a due on sale clause with the risk of getting caught?”
6. Further in his coaching, Bill Bronchick explains that the real game is to how to transfer ownership to the property without getting caught by the lender.
7. The Garn St. Germain Act carves several exceptions in which the lender may not enforce the due-on-sale like the creation of a lien or other encumbrance subordinate to the lender's security instrument which does not relate to a transfer of rights of occupancy in the property; a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety; a transfer where the spouse or children of the borrower become an owner of the property; a transfer into an inter-vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property, etc. To learn more about Bill Bronchick’s coaching please visit www.billbronchickcoaching.com.
