An alienation clause
voids certain contractual obligations to an asset if that asset is sold or if ownership is transferred to another entity
. These clauses are common in mortgage loans, which release borrowers from the lender once the property has been transferred to a new owner.
What is mortgage alienation clause?
An alienation clause, also known as a due-on-sale clause, is
a real estate agreement that requires a borrower to pay the remainder of their mortgage loan off immediately during the sale or transfer of a property title
and before a new buyer can take ownership.
What is the difference between alienation clause and acceleration clause?
What's the difference between alienation and acceleration clauses? While an alienation clause is activated when you sell your home,
an acceleration clause becomes effective when you fail to meet a requirement of your loan terms
. The most common reason is a missed mortgage payment.
What is an acceleration clause in a loan?
An accelerated clause is
a term in a loan agreement that requires the borrower to pay off the loan immediately under certain conditions
.
In which of the following situations is a lender prohibited from enforcing an alienation clause?
Obtaining a second mortgage
: When obtaining a second mortgage on the property, the senior mortgage lender cannot enact the alienation clause and require you to pay the mortgage in full. A prime example of a second mortgage is a home equity loan.
What type of mortgage loan is the most common and generally viewed as the most secure?
A conventional loan
is the most common type of mortgage, and the one that usually comes to mind when you think of a home loan. They're offered by just about every mortgage lender. Unlike FHA or VA loans, conventional loans are not government-backed.
What is the purpose of a lifting clause?
A provision in a second,third,or other junior mortgage
that allows the liens ahead of it to be paid off and refinanced for the same or a lesser amount
,without sacrificing their priority in lien positions.
What does alienation of property meaning?
the transfer of property, as by conveyance or will, into the ownership of another
. Alienation is an act whereby one man transfers the property and possession of lands, tenements, or other things, to another. …
What makes a mortgage assumable?
An assumable mortgage is
an arrangement in which an outstanding mortgage and its terms can be transferred from the current owner to a buyer
. When interest rates rise, an assumable mortgage is attractive to a buyer who takes on an existing loan with a lower rate. … Buyers must still qualify for the mortgage to assume it.
What is a power of sale clause?
Most deed of trust mortgages include a power-of-sale clause. This clause
allows the trustees in deed of trust mortgages to do non-judicial foreclosures on delinquent borrowers
– that is, foreclose without going to court.
Can a bank call your loan?
The bank can “call” the loan and demand full payment of the remainder of the loan immediately
. While this practice is legal if disclosed in the terms of the loan, a bank likely will never call the loan unless you fail to meet the loan's terms. For example, one or more late payments might trigger a call on the loan.
What happens when your loan is accelerated?
An acceleration clause allows
the lender to require payment before the standard terms of the loan expire
. Acceleration clauses are typically contingent on on-time payments. … In most cases, an acceleration clause will require the borrower to immediately pay the full balance owed on the loan if terms have been breached.
What happens when a loan is negatively amortized?
Negative amortization means that
even when you pay, the amount you owe will still go up because you are not paying enough to cover the interest
. … The unpaid interest gets added to the amount you borrowed, and the amount you owe increases.
What is the broker protection clause?
To protect brokers in this instance, most listing agreements have what is known as a “broker protection clause,” also known as an “extension clause” or “tail provision.” The broker protection clause
provides that if the owner contracts to sell the property with a buyer who was procured by the broker within a specified
…
What is an assumption clause?
An assumption clause is
a provision in a mortgage contract that allows the seller of a home to pass responsibility for the existing mortgage to the buyer of the property
. In other words, the new homeowner assumes the existing mortgage. The buyer must typically meet credit and other qualifications.
What is a prepayment clause?
A prepayment penalty clause states that
a penalty will be assessed if the borrower significantly pays down or pays off the mortgage
, usually within the first five years of the loan. Prepayment penalties serve as protection for lenders against losing interest income.
