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in this video we're going to talk about the due on sale clause and the six situations where the lender can't call your mortgage due now the deal on sale clause is where a lender can force you to instantly pay off 100 of your mortgage when you change title to the property so we're going to cover the six situations where the lender can't instantly call your loan due and the benefit to you is by knowing all six situations it will keep the lender from suddenly pulling the rug out from underneath you and taking your house or other real property away from you i am the business guy the ceo of asset protection planners and lawyers limited the nation's largest asset protection firm and so you don't get the rug pulled out from underneath you when we make our next videos please click the subscribe button and notification bell so you'll be up to date right away and you can also give the like button a click so youtube promotes this video and i'd really appreciate your help now in 1982 the due on sale clause was put into almost all u.s mortgages with the introduction of the garn saint-germain depository institutions act now one of the things this act does is that it allows lenders to keep you from freely changing the title of somebody else and keeping the loan in place in fact as a new real estate investor in the late 80s and early 90s the first thing that we would do is we would ask sellers is the loan assumable and if so and the seller was desperate enough the seller would just transfer the title to us and we would just make the payments and in some cases if the seller agreed we would just write up and record a second mortgage on the property and make one monthly payment to the original lender and another monthly payment to the seller and get the property for little to nothing out of our pockets up front and it was really great our group got tons of properties for nothing down and in addition to no money down there was no qualifying for the mortgage now the downside to the lender is the seller could just transfer the title to any old deadbeat buyer and there's really nothing the lender could do and that turned out to be a problem unfortunately some unscrupulous players messed up for the rest of us some predatory buyers would seek desperate sellers who would transfer the property for nothing down to the buyers corporation for example the corporation made no payments and the new buyer would collect the rents on the property then when the lender tried to foreclose the owner of the corporation would file corporate bankruptcy dragging the whole foreclosure process out and really causing a mess for the lenders but now if somebody transfers their home to you and the home has a mortgage on it the bank can instantly force the loan due all at once or foreclose on the loan even if all the payments are being made but what if you and your spouse get a divorce and the title to your home is transferred to you or your ex-spouse alone you feel confident you can afford the monthly mortgage payment but can the mortgage lender call that loan due all at once or suppose you inherit a house from a relative you move into the house can the mortgage lender force you to pay off that mortgage even though you keep up the monthly mortgage payments or suppose your spouse dies and you take the title in your name alone as the surviving joint tenant can the mortgage lender require you to pay off the mortgage due to the title transfer the answer to all three questions above is no but it happens to many people some lenders will try to mislead you into thinking the existing mortgage should be paid off alternatively they may simply not know the laws fortunately i do and we have attorneys on our staff and as a result we've had to stand up for our clients to many lenders who simply don't know the law or we're trying to pull a fast one now as of this recording a lender who tries to enforce a due-on-sale clause today with an existing mortgage with an interest rate of above six percent is insane now another thing some lenders will try to do is to extract an assumption fee typically one to two percent of the mortgage balance but in many cases lenders aren't legally entitled to do so so when congress passed the garn saint-germain depository institutions act of 1982 this law allowed lenders to enforce the due on sale clause on mortgages and demand payment and fall when the title to a property changed ownership it overturned many court decisions that said due on sale clauses were not enforceable however the guarn st germain law also covers title transfer situations when mortgage lenders cannot enforce the due on sale clause if a lender tries to enforce a due on sale clause check with a local real estate attorney to see if you're being misled there are at least six title transfer situations when mortgage lenders cannot call the loans number one when there is no due on sale clause now many mortgages held by private parties don't contain due on sale clauses and obviously if there's no due on sale clause the lender can't typically demand mortgage payment in full when title ownership changes so always get a copy of the mortgage or deed of trust and promissory note to look for the due on sale clause now most conventional home loans and recent fha and va mortgages do contain due on cell clause one way to know for sure is to read the loan papers especially paragraph 17 which usually contains the due on sale clause number two when a junior mortgage lien is recorded some mortgages contain a due on encumbrance clause which says that if a property owner places a junior mortgage or lien on the property such as a home equity loan the senior or first mortgage lender can call the mortgage due but the garden st germain law says that such a clause is unenforceable and the reason is that placing the second loan on the property actually makes the first loan safer not less secure and here's the reason if the borrower doesn't pay the first mortgage the second mortgage lender will usually step in to keep the payments current to avoid being wiped out in foreclosure the result is that the first mortgage lender is more secure than before number three when one spouse dies when one spouse dies a surviving joint tenant or tenancy by the entirety or tbe spouse usually takes title after a joint tenant or tve spouse dies and a surviving joint tenant or spouse takes title the garn saint-germain law bars the mortgage lender from calling the loan due however some unscrupulous lenders try to make the surviving joint tenant either pay an assumption fee or pay off the entire mortgage by law that's not required number four inheritance by a relative who is an owner occupant when a relative inherits and occupies a residence the garden saint-germain bars the lender from enforcing the due on sale clause however some lenders will try to coerce the air into paying unnecessary mortgage assumption fees number five when the title is transferred to either a spouse or a child of a divorced co-owner when a co-owner is divorced if the title to the residence is transferred to either an ex-spouse or offspring of the divorced owner who will live in the home garn st germain bars the lender from enforcing the due on sale clause and number six and this is a big one when the title is transferred to an inner vivos trust that's a trust you can change during your lifetime in fact that's what we do we've created thousands of trusts for real estate this can either be a land trust that we create for clients to own real estate privately or a living trust for inheritance purposes millions of homeowners hold title of their residence in trusts the primary reason for a living trust is to avoid probate for inheritance purposes when a mortgage borrower makes a title transfer the lender cannot enforce the due on sale clause and this is the case as long as the property is between one and four dwelling units that's property where people live and the borrower is a beneficiary of the trust however the lender is entitled to receive a copy of the trust if they request it in summary although smart mortgage lenders realize that it's foolish to enforce a due on sale clause today especially if the interest rate is above the current low rates some lenders will try to illegally extract assumption fees or even insist on loan payoff so call us for details if you want to put your property into a land trust or living trust please click like subscribe and share this video with others thanks for watching this is the business guy [Music] you