Full question:
I am recently divorced, my ex-wife is keeping the house, and I have already been paid my share of the equity. She is going through the assumption process to take over the loan and needs me to give her a quit claim deed in order for the loan assumption to go through. However, there will be a period of time before I am released of liability from the loan because the bank is in another state, and will need me to mail the deed to them. Am I at risk during that time period being responsible for the loan, but no longer having the house as collateral? And is there anything I can do to relieve myself of that liability during that time?
- Category: Real Property
- Subcategory: Mortgage Satisfaction
- Date:
- State: Colorado
Answer:
The answer will be a matter of company policy of the lender. The terms of the assumption agreement will determine who is liable for the loan in the interim period. We suggest contacting the lender to find out whether there is a due on sale clause, and if so, whether they will consent to the transfer without accelerating the loan. If there is a mortgage on the property, the contract may violate a due-on-sale clause in the mortgage which the lender may or may not seek to enforce.
Most lenders require that the mortgage or deed of trust contain a due on sale clause. This is an acceleration clause in a loan, calling for payment of the entire principal balance in full, triggered by the transfer or sale of a property. Such a clause permits a secured mortgage lender (federal, state or private) to call the entire unpaid loan balance due and payable immediately if the property securing the loan is sold, transferred, traded, gifted or otherwise disposed of without the lender’s prior written consent.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
