Crucial Exams

Multistate Bar Examination Practice Question

A homeowner obtained a mortgage loan from Bank A to purchase a residence, which included a due-on-sale clause. Two years later, the homeowner privately sold the property to a buyer and allowed the buyer to take over the mortgage payments. The sale occurred without notifying Bank A or obtaining its consent. When Bank A became aware of the sale, it invoked the due-on-sale clause and demanded repayment of the outstanding loan balance. How would the law evaluate Bank A's rights?

  • The enforceability of the due-on-sale clause is determined by the agreement's terms between the homeowner and the buyer.

  • A court can determine the due-on-sale clause unenforceable under certain legal standards.

  • Bank A can enforce the due-on-sale clause and demand repayment of the remaining mortgage balance.

  • The buyer's assumption of payments challenges the enforceability of the due-on-sale clause by Bank A.

Multistate Bar Examination
Real Property
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