feb 28 - loan-lender/seller liable-lender makes the call...

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2/28 Due on sale clause (alienation clause) -gives lender the option of allowing an existing mortgage loan to be assumed (taken over) by a new borrower (buyer) -possible reasons- interest rates- mkt rates higher than the loan -don’t want if buyer is a credit risk -if clause is allowed: 1. Buyer (new borrower) enters the contract subject to the existing the existing mortgage and note -buyer is liable in event of default Or 2. Buyer enters the contract by assumption of the existing mortgage and
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Unformatted text preview: loan-lender/seller liable-lender makes the call whether it is by assumption or subject to-risk is that if buyer defaults, property is sold at auction for less than mkt value-the greater the spread btwn loan balance and sale price, the less the risk to the seller Insurance Clause-requires the borrower to maintain adequate insurance on the property-adequate- amount greater than or equal to the amount of the loan-you want mortgage value to cover value of land...
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