is transferred to a new owner. Due-on-sale clauses have become increasingly prevalent in mortgage contracts. The federal Garn-St. Germain Act carves out some exceptions to the enforceability of a due-on-sale clause. These include transferring the property from a parent to a child or transferring it from one spouse to the other. The Garn-St. Germain Act also negates due-on-sale clauses in property transfers related to a divorce or legal separation, or to the death of the original borrower if a family member receives the property. While the Act is a federal law and thus preempts most conflicting state laws, it does not apply in a few states that enacted their own due- on-sale clause restrictions during the three-year time period provided by the Act. Even if you have a due-on-sale clause, the lender may not necessarily enforce it. Sometimes a lender simply wants an assurance that it will receive regular payments from someone, and it may not matter who that person is. A lender also may be open to a mortgage assumption if the property is underwater, such that its value is less than the remaining balance on the loan.
MORTGAGES ALREADY IN DEFAULT
If the foreclosure process is already underway, the new owner of the property also may face a foreclosure after the property transfer unless they can catch up with payments. They may be able to reinstate the loan by paying back the missed payments as a lump sum. Or they may be able to agree on a loan modification or a repayment plan with the lender. Special options may be available when Fannie Mae owns the loan. PURSUING THE ORIGINAL OWNER AFTER A MORTGAGE ASSUMPTION
You should be aware that you still may be liable under the
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