No Lender Approval for Due on Sale
A few weeks ago, I posted (here) about obtaining lender approval when placing property into a living trust. I then received an interesting e-mail from reader Richard Barid of the Savannah, Georgia law firm of Smith Barid, LLC. Mr. Barid pointed me to a portion of the US Code (12USC1701j-3(d)(8), which can be found here) that seems to indicate lender approval isn't needed. To quote the relevant parts of 1701j-3 (the emphasis added is mine):
(a)(1) the term “due-on-sale clause” means a contract provision which authorizes a lender, at its option, to declare due and payable sums secured by the lender’s security instrument if all or any part of the property, or an interest therein, securing the real property loan is sold or transferred without the lender’s prior written consent;(b)(2) Except as otherwise provided in subsection (d) of this section, the exercise by the lender of its option pursuant to such a clause shall be exclusively governed by the terms of the loan contract, and all rights and remedies of the lender and the borrower shall be fixed and governed by the contract.
(d) 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... (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
[.]
Mr. Barid adds that it's still a good idea to talk to a client's lender, for professional courtesy and to avoid surprises.
