Posted by ron on March 25, 2003 at 24:26:27:
I’ve asked this question to many people, and get many different answers. I am going to work with an attorney on this matter myself. I’ve been told by most investors technically they can call the loan, but it’s very rare, just keep making the payments. Some people find out if the insurance is in a different name. I would have an attorney do it for you just to be safe.
Quitclaim into L.L.C. - Will lender call loan? - Posted by Marcus
Posted by Marcus on March 24, 2003 at 23:47:25:
If the ownership of a property changes without the new owner qualifying for a mortgage cant the loan be accelerated?
If i quitclaim my poperty into my L.L.C. cant the lender call the loan due to ownership change?
Re: Quitclaim into L.L.C. - Will lender call loan? - Posted by Kevin
Posted by Kevin on April 03, 2003 at 24:03:27:
It’s been a couple of years since I studied this issue, but the following may be useful information regarding due on sale clauses - at the very least it’s medicine for insomnia.
A lender can enforce it’s due on sale clause SO LONG AS the transfer (or sale) of the property is not an exempted transfer as provided for in the relevant part of the Garn-St. Germain Act (12 U.S.C. s 1707j-3(d)) or related federal regulations prescribed by the Office of Thrift Supervision (see the text of the Act at www4.law.cornell.edu/uscode/12/1701j-3.html). (See relevant federal regulations - 12 CFR 591.5 - at http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi). A transfer to a new legal entity, whether you are the sole owner of such entity or not, is not an exempted transfer, and therefore, your lender CAN accelerate the loan due to the transfer.
That is the law. However, practically speaking, a lender can, but may not, call the loan due in your situation. If you are tight with your banker, then probably not. If it’s a higher than market interest rate loan, a low LTV on the property, and a good payment history, then probably not. Many factors can come into play in the lender’s decision. But, they do have the right to. You should get a waiver of that clause from your lender - or at least some sort of amendment to the clause reflecting your current situation. In any event, the lender will likely want the LLC to become a party to the loan documents (maybe for default judgment purposes if nothing else). This is all moot, of course, if the lender never learns of and never will learn of the transfer.
Re: Quitclaim into L.L.C. - Will lender call loan? - Posted by John
Posted by John on March 25, 2003 at 13:51:42:
The lender should not call the note due if you have not lost beneficial interest in the property. How is your LLC set-up as a member managed or manager managed? Are you the sole person in the LLC, if so it should not cause the lender to call the note? If they do simple contact them and explain you have not lost beneficial ownership or moved out. If you move out of the home and no longer use it as your primary residence they usually have the right to call the note, however it is unlikely they would do so. Hope that helps.