Re: Due On Acceleration Clauses - Posted by JohnBoy
Posted by JohnBoy on July 06, 2001 at 12:58:29:
There are still assumable loans out there being written today. The only problem is you have to qualify to assume them. Adj rate loans don’t have DOS clauses in them. Those that do, you can still assume. You can assume any loan regardless of the DOS clause. Also, just because you violate the the DOS doesn’t mean a lender WILL call the loan due. It only means the lender has the OPTION of calling the loan due. If the payments are being made on time then it is unlikely that the lender would call the loan due. Why would they call a perfectly good performing loan due, only to cause the buyer to stop making the payments, forcing the lender to have to foreclose if the buyer doesn’t pay them off upon demand, and end up with the buyer destroying the property and living in it for up to 1 - 2 years without making the payments, only to end up with a bad loan on their books and get back a property they risk at selling for a loss? Not likely, unless the payments are late then they may call the loan due, or if the loan was at a low interest rate and current rates were way up, they might call the loan due so they can lend that money out at a higher rate. That might justify the costs of going through a foreclosure.
If they did call the loan, you could refinance to pay them off. If you couldn’t qualify for refinancing, do you think you could sell the property to someone that can get a loan and pay the lender off long before they could get the property back through a foreclosure?
Also look into taking existing loans over “subject to” in order to get around the lender from finding out about the sale of the property.
Remember, it’s not a CRIMINAL OFFENSE to violate the DOS clause in a mortgage. It’s only a breach of the mortgage agreement which would be a civil matter where the lender could call the loan due for breaching the mortgage agreement. Key word, the lender “could” call the loan due, they don’t “have” to call the loan. They have the “option” to do so IF they were to find out about it!
Run a search on “subject to” to find more info on how to get around the DOS clause and help prevent the lender from ever finding out about it.