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Bill bronchick

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The due-on-sale (a.k.a "acceleration clause") is a provision in a mortgage document which gives the lender the right to demand payment of the remaining balance of the loan when the property is sold.

The due-on-sale (a.k.a "acceleration clause") is a provision in a mortgage document which gives the lender the right to demand payment of the remaining balance of the loan when the property is sold.

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    Bill bronchick Bill bronchick Presentation Transcript

    • Sale Jail
    • The due-on-sale (a.k.a "acceleration clause") is a provision in a mortgage document which gives the lender the right to demand payment of the remaining balance of the loan when the property is sold.
    • It is a contractual right, not a law. This means that if title to the property is transferred, the bank may (or may not), at its option, decide to "call the loan due." An "assumable" loan is one, which is secured by a mortgage that contains no due-on-sale provision.
    • FHA-insured mortgages originated before 12/89 and VA-guaranteed loans originated before 2/88 contain no due-on-sale provisions. Nearly all loans originated today contain a "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."
    • Many people are under the mistaken impression that transferring title to a property secured by a "due-on-sale" mortgage is illegal, tells Bill Bronchick in his coaching. This is because most lay people confuse civil liability with criminal liability. To be "illegal," you must be in violation of a criminal law, code or statute. There is no federal or state law, which makes it a crime to violate a due-on-sale clause.
    • If the lender discovers the transfer, it may at its option, call the loan due and payable. If it cannot be paid, the lender has the option of commencing foreclosure proceedings mentors Bill Bronchick in his coaching. 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? – explains Bill Bronchick in his coaching.
    • In his coaching, Bill Bronchick tells that the game for us is how to transfer ownership to the property without getting caught by the lender. You could simply get the owner to sign you a deed and not record it, but this method is problematic (for example, what if the seller gets a judgment against him?).
    • Enter the "trust assignment trick… 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, visit www.billbronchickcoaching.com.
    • Thanks