When Transferring Title After Marriage “Due on Sale” Clause Unenforceable

A home was purchased in Surprise, Arizona, three years ago after a man was divorced. The title to the home was in the homeowners name only. However, last year the homeowner married again and he added his new wife to the title to the home. The mortgage loan, however, was still in man’s name only. The mortgage payments are current. If the bank discovers that the man’s new wife is on the title to the home, will the bank require immediate full payment of the mortgage loan according to Arizona real estate law?

Most mortgage loans have a “due on sale” clause allowing the mortgage lender to require immediate full payment of the mortgage loan upon any transfer of the title to the home. However, Federal law prohibits most mortgage lenders from enforcing the “due on sale” clause after certain transfers of the title to the home. 12 U.S.C. §1701j-3(d). These exempt transfers of title to the home include a transfer to a living trust, a transfer pursuant to a divorce decree, a transfer after death to a relative of the borrower, and any transfer to a spouse or child of the borrower. Therefore, when the homeowners new wife was added to the title to the home last year the mortgage lender was prohibited from enforcing the “due on sale” clause to require immediate full payment of the mortgage loan.

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