Due on Sale Clauses
From WFG Wiki
Pursuant to federal law, state law prohibitions on the enforcement of due on sale clauses were pre-empted. 12 U.S.C. 1701j-3 This act does not apply as to reverse mortgages.
The same provision restricts the exercise of a due on sale clause as to residential property less than 5 units, based on:
- 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;
- the creation of a purchase money security interest for household appliances;
- a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
- the granting of a leasehold interest of three years or less not containing an option to purchase;
- a transfer to a relative resulting from the death of a borrower;
- a transfer where the spouse or children of the borrower become an owner of the property;
- a transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes 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; or
- any other transfer or disposition described in regulations prescribed by the Federal Home Loan Bank Board.