Re: Will AITD trigger the due on sale clause - Posted by JohnBoy
Posted by JohnBoy on July 04, 2003 at 11:19:19:
It does matter whether you sell on CFD, AITD, or even a lease containing an option to buy…they all violate the DOSC.
If you do not allow the buyer to record anything then it is unlikely the lender would find out, unless you where to tell them about it. But if you record anything, including a memorandum, then the lender could find out if they ever checked title on the property. The idea is to not record anything unless YOU are the buyer.
Just because you violate the DOSC does not mean the lender WILL call the loan. It only allows the lender the RIGHT to call the loan IF they “choose” to do so. As long as the payments are made on time and kept current it is unlikely the lender would call the loan. It is not a criminal offense for violating a DOSC. It is only a civil matter where the lender “could” call the loan, if they choose to exercise that right.
If they call the loan, ignore them. Even if they called the loan and you ignore it, it is unlikely they would follow through with taking legal action to enforce it. To enforce a DOSC by calling the loan, the lender will still have to go through the foreclosure process to get the property back if you refused to pay it off over them calling the loan due.
The time frame to successfully foreclose on a property will vary from State to State. States that require a judicial foreclosure typically take the longest to complete. In my State it takes a minimum of 9 - 12 months to foreclose on a property and that is if the foreclosure is uncontested. If you contest it, it can take a lot longer and up to a few years to complete.
Do you know what happens when a lender has a defaulted loan that is not performing? The lender is restricted from loaning 8 times that amount in other loans. That means if you have a $100k loan, the lender is restricted from loaning out $800k in other loans until they can clear up the $100k loan that is in default that is not performing. Do you know how much that will cost the lender from having to hold $800k in money that can’t loan out? A LOT! So why would they take a perfectly good paying loan and cause it to go into default by enforcing the DOSC when all the payments are being made on time and the loan is current? They would be stupid to enforce the DOSC in this case. However, if the payments are late or not being made, then they will call the loan and enforce the DOSC. So always make sure the payments are made on time and the loan remains current. Then it is unlikely they will enforce a DOSC.
But even if they did enforce it. If you live in a State where a foreclosure can take a year or two to successfully complete, don’t you think you can get the property sold in that amount of time where the loan would get paid off before the lender can successfully complete the foreclosure? Or you could refinance the property and pay the lender off, if that is something you were willing to do.
Bottom line…the DOSC is something that I don’t worry about.
Your mileage may vary…