Posted by Chicago Steve on October 31, 2000 at 15:51:23:
Thanks Bill!
DOS clause-have they wised up? - Posted by Ben (NJ)
Posted by Ben (NJ) on October 30, 2000 at 15:12:33:
I usually don’t follow the DOS posts because they don’t apply to what I do but I am in the process of foreclosing
on a tax lien and I noticed language in a mortgage note which I had not seen before, it’s called the “Due-On Transfer Rider” and says that the loan will be declared immediately due and payable upon “transfer of the property
OR a beneficial interest in borrower”. Is this old news or are lenders wising up to the ways of circumventing the DOS clause?
No tirades (short) - Posted by Bill Gatten
Posted by Bill Gatten on October 30, 2000 at 19:39:52:
Ben, As you may know, this my favorite topic. But rather than do another tirade here, let me just say that the verbiage is standard, but as Brian pointed out those threats are (must be) preceded by a phrase to the effect that ?unless prohibited by applicable law, with the prior approval of the secretly…THEN we will clamp down.? Well, the clamping down IS prohibited by the Federal Depository Institutions Act, a LAW, when if the transfer is a lease for less than 3 years or a lease without an purchase option, or a transfer to a trust, or transfer to a child or spouse, etc, etc.
Also note the tricky verbiage that says the borrower has to get permission [only] if NOT A NATURAL PERSON. Duh…aren?t Bob and Suzy Borrower, natural persons? Obviously, a corporation or partnership can’t sell interest in itself if the loan was made to its self: but Bob and Suzy sure as heck can.
The ?not natural person? thing is one of the major reasons that Illinois banks love making loans to land trusts?because their due on sale clauses can hold some water then.
Bill
Cognitive Rigidity - Posted by Brian Mac
Posted by Brian Mac on October 30, 2000 at 18:16:13:
Ben,
This is what Bill Gatten points out about human behavior that document drafters exploit. And you’re an attorney, right? 
I believe you may also find the phrase: “if/unless permitted by applicable law”, in there somewhere. ie. The Garn Act
Have a good one
Brian Mac
Re: DOS clause-have they wised up? - Posted by Jim LaVerdi (Phx_Az)
Posted by Jim LaVerdi (Phx_Az) on October 30, 2000 at 17:48:47:
Regardless of what it says “Who Cares”!
If you are transferring title into a Land Trust and the original owners are remaining as beneficiaries in that Trust that is perfectly fine. It’s the assignment of beneficial interest that would trigger the DOS, but who’s going to tell them? I sure wouldn’t!
There is no problem here!
Jim LaVerdi (Phx_Az)
Re: DOS clause-have they wised up? - Posted by Rob FL
Posted by Rob FL on October 30, 2000 at 16:54:01:
This has been standard language on most institutional mortgages for quite some time.
Re: No tirades (short) - Posted by Chicago Steve
Posted by Chicago Steve on October 30, 2000 at 22:02:24:
Whooaaaaa(%#@(
Bill, I’m closing a refi in the name of a corp tomarrow. What’s this “not natural persons” business in Illinois banks?
Re: No tirades (short) - Posted by Rob FL
Posted by Rob FL on October 30, 2000 at 20:23:27:
I always understood that under common law that because revocable trusts were pass through entities that the beneficiaries were the “natural persons.” That is the case in most issues of IRS tax law and homestead law, isn’t it?
Re: No tirades (short) - Posted by Bill Gatten
Posted by Bill Gatten on October 31, 2000 at 12:21:39:
Shy Steve,
To my knowledge, Brian is absolutely krek.
Many Illinois Banks love making loans to land trusts for the same reason. This stops you from transferring beneficial interest (i.e., stock), whereas if you are a natural person, you can do so as long as you “are and reamain A” beneficiary. In re. you corportion, if they make a loan to it, you will be stopped from selling stock in it without their permission: if you do, they can call the note (if they want to).
Bill
Re: No tirades (short) - Posted by Brian Mac
Posted by Brian Mac on October 31, 2000 at 24:05:34:
Steve,
I’m not 100% certain here, but I think it means that if the mortgagor is an entity other than a natural person, then the mortgagee can enforce the acceleration clause if it is breached, without hindrance from such regulatory legislation as The Garn Act. If so, it should apply in all states.
Brian Mac
Re: No tirades (short) - Posted by Bill Gatten
Posted by Bill Gatten on October 30, 2000 at 21:12:32:
That may be a non sequitur. The pass-through characterization is a pronouncement by the taxing agencie (e.g., IRS), I believe. They say that since the beneficiaries hold no realty, they should non-the-less be treated as owners of real estate for income tax purposes.
The fact that the borrowers are “natural persons” is the issue here. I.e., if the borrower were NOT a natural person, then “it” could not sell a beneficiary interest in itself; but if the borrower is just plain 'ol natural Fred Smithers, then the clause doesn’t apply.
Bill