Posted by Clyde on November 16, 2005 at 17:38:30:
Wrong on both cases.
It gives the lender the right to foreclose under the due on sale clause in the deed of trust.
It DOES NOT give the junior lienholders any rights for anything.
It is the Garn-St Jermaine Act of 1982.
Was brought about by the Wellenkamp vs Bank of America Suit.
Simply do a google search on “Garn-St Germain Act of 1982” and you will get tons of info.
Garn-St. Germaine - Posted by Chris
Posted by Chris on November 16, 2005 at 11:23:58:
Garn-St. Germaine
I believe it is the act of 1981.
It states that a second position lein holder has the right to assume the first position in order to protect their interests.
Where would I find the exact wording for this ruling?
Would the second position assume the first loan or would they have to secure new financing?
Thank you
Re: Garn-St. Germaine - Posted by William Bronchick
Posted by William Bronchick on November 18, 2005 at 10:40:52:
Actually, Clyde is half right. The Garn Act does not say anything except that a lender may not enforce a due on sale if the borrower encumbers the property with a junior lien. Remember, to encumber a property with a lien, you must convey an interest in the property. Theoretically, ALL conveyances are covered in the due on sale clause, but the Garn Act lists the type of conveyances that does NOT permit a lender to enforce it.
Subsequent court cases have said that a junior lien holders may foreclose and take title subject to the first mortgage and that said mortgagee cannot enforce the due on sale in this event. The rationale is that if the Garn Act permits junior liens, it’s also possible that such junior liens might end up being foreclosed. In one Colorado Appellate case, the court said that even a deed in lieu of foreclosure would not trigger the due on sale.
In practice, the first mortgagee rarely objects to the transfer anyway. And, remember that if the junior lien holder just makes up the payments on the first with no title transfer, the mortgagee cannot even balk because there’s not transfer of ownership.