[WSBARP] due on sale clause

[Wendy Walter]

Generally, the Garn-St. Germain Act exempts such transactions from being a violation of the due on sale clause.

12 U.S. Code § 1701j–3

(d) Exemption of specified transfers or dispositions
With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, or on a residential manufactured home, a lender may not exercise its option pursuant to a due-on-sale clause upon—
(1) the creation of a lien or other encumbrance subordinate to the lender’s security instrument which does not relate to a transfer of rights of occupancy in the property;
(2) the creation of a purchase money security interest for household appliances;
(3) a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
(4) the granting of a leasehold interest of three years or less not containing an option to purchase;
(5) a transfer to a relative resulting from the death of a borrower;
(6) a transfer where the spouse or children of the borrower become an owner of the property;
(7) a transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property;
(8) a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property; or
(9) any other transfer or disposition described in regulations prescribed by the Federal Home Loan Bank Board.


Wendy Walter | Partner - Pacific Northwest | Member State Bars of WA and OR
McCarthy ♦ Holthus LLP
    m. 108 1st  Ave. S., Suite 300, Seattle, WA  98104
    d. 206.596.4844 | f. 206.780.6862 | c. 425.241.5459
    e. wwalter at mccarthyholthus.com<mailto:wwalter at mccarthyholthus.com>
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From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Douglas W. Scott
Sent: Friday, October 28, 2016 3:11 PM
To: WSBA Real Property Listserv (wsbarp at lists.wsbarppt.com)
Subject: [WSBARP] due on sale clause

Note and deed of trust to my client are signed by debtors husband and wife encumbering their home. Note is due in December 2017 or the earlier date of sale, refinance or transfer. Husband and wife divorced and husband quit claimed the house to the wife. Wife has filed for chapter 13 bankruptcy.  Question: is the quit claim to the wife a sale or transfer triggering the Note being due?

Douglas W. Scott
Law Offices of Douglas W. Scott
Windermere Building
1810 15th Place NW, Suite 203
Issaquah, Washington, 98027
V.  425.392.8550
F.  425-392-2829
www.davisscottlaw.com<http://www.davisscottlaw.com/>

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