Can anyone tell me what types of mortgage notes have these clauses? Can a lender put one in your mortgage note without your knowing it prior to settlement on a investment property that you are cashing out of and then selling to another buyer. I;m just curious about that.
thanks everyone. ???
All residential mortgage notes originated by institutional lenders since 1989 have this clause.
For several years, the banks and consumer groups fought over whether banks should have the right to “call the loan due”. Finally, as expected, the banks won and the Garn-St. Germain Act of 1982 was passed by Congress giving the banks the right to do so.
An exception was made to pacify the wealthiest investors and congressmen who regularly use land trusts. Thus, land trusts became exempt from the DOSC.
That is why we have had several back and forth discussions about subject 2 vs. land trusts. If you do a subject 2 within a land trust, it is exempt. Please understand that a violation of the DOSC is not a violation of the law, it just allows the banks to invoke the DOSC if they so choose. In the '80’s they did it often, now it is a rare case when it’s done although there have been a couple of recent cases in Texas, Illinois, Colorado and California. The DOSC will only become an issue if interest rates rise to a level that makes it profitable for banks to begin to do so.
I hope this provides an understanding of what it is and why it is so contructed.
Da Wiz
Hey Gary! You are the best! Your explanation summed it up and did’nt make me feel stupid for asking the question.
Thank you.
JW :