Crucial Exams

Multistate Bar Examination Practice Question

A property owner borrowed $200,000 from a lender to purchase a home and executed a mortgage that included a due-on-sale clause. Five years later, the owner sold the home to a buyer. The buyer agreed to take over the mortgage payments but did not notify the lender of the transfer. After discovering the sale, the lender accelerated the loan and began foreclosure proceedings, asserting that the transfer triggered the due-on-sale clause.

Does the lender have the legal right to foreclose?

  • Yes. Due-on-sale clauses are enforceable when ownership is transferred without the lender's consent.

  • No. The lender must first prove that the transfer significantly impaired its security interest before foreclosing.

  • No. The lender is barred because the buyer assumed responsibility for the mortgage payments.

  • No. Federal law restricts enforcement of due-on-sale clauses unless a state statute specifically authorizes it.

Multistate Bar Examination
Real Property
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