make subto safe again

The due on sale clause is a provision in mortgages that allows the lender to demand immediate full payment of the loan if the property is transferred without their consent. In subject-to transactions where the buyer is taking over the existing mortgage without lender consent, the due on sale clause poses a serious risk.

However, enforcement is typically discretionary - in most cases, lenders don't have to call the loan due even if they notice the transfer.

Lenders have contractual authority to enforce due on sale clauses based on the mortgage agreement signed by the original borrower. These clauses are legally binding contract provisions recognized under federal law. When a property transfer triggers the clause, lenders have the legal right to accelerate the loan, demanding full payment of the remaining balance, and if payment isn't made, they can initiate foreclosure proceedings according to state laws.

While the overall likelihood is low, the impact is high for those impacted by the due on sale clause.

The percentage is unknown. To complicate the matter some loan types are more susceptible, certain types of lenders are more likely to pursue due on sale (such as small banks and credit unions), and many other individual factors such as the loan history or even what county the property is located can affect the likelihood of a due on sale.

As technology, automation, and AI continue to advance, it is yet to be seen if any of the larger banks will pursue due on sale on a mass scale. Even now, some of the large loan servicers are known to be more aggressive with due on sale.

Information about due on sale events is difficult to come by, but DOS Guard is committed to collecting what it can so as to discover trends, likelihood, best practices, red flags, and more. If you're aware of a due on sale event, please report it to us: [email protected]

1) DOS Guard provides risk reduction guidance and best practices based on experience with multiple due on sale events.

2) DOS Guard manages actual due on sale events by identifying stakeholder requirements, building a transaction restructure plan(s), and implementing the plan selected by the parties.

If you receive a due on sale notice, contact DOS Guard immediately (even if you don't have an active DOS Guard plan).

DOS Guard will triage the situation, give you immediate next-steps, and set up strategy/management calls.

DOS Guard will provide strategic guidance, communication support with the lender and other stakeholders, and documentation as appropriate.

DOS Guard Complete is ideal for first-time subto buyers and one-off transactions, providing complete access to our consultation services with no additional costs.

DOS Guard Pro balances upfront cost with ongoing support. The overall cost is higher, and a deductible is due to initiate due on sale remediation.

DOS Guard Lite is designed for investors purchasing multiple subto deals and is only available for returning customers. It facilitates a portfolio of subto homes by minimizing upfront cost while providing ongoing support and access to fixed-rate due-on-sale remediation.

If you've already closed on your subto deal, start with a DOS Ready Assessment to identify risks and alignment with best practices, and to determine if you're eligible for a DOS Guard plan.

DOS Guard is available 2 ways:

1) Ask for it from your DOS Guard Certified TC, and they will add the plan, paperwork, and fees to your closing.

2) Buy a plan from the DOS Guard website and a DOS Guard Certified TC will connect with you to add DOS Guard docs to your closing.

NOTE: It is worth delaying closing to get this right. DOS Guard is not available after closing without a paid DOS Ready Assessment first.

Yes, but not for investor purchases or transfers to non family members.

According to the Garn-St. Germain Act, lenders can't enforce the due on sale clause in these cases:

Transfers resulting from the death of a borrower to a relative

Transfers to a spouse or children from divorce or separation

Transfers into a living trust where the borrower remains the beneficiary

Properties with 1-4 residential units when transferred to a spouse or child

Certain lease arrangements under 3 years without purchase options

Note: This is not an exhaustive answer.

These factors may (or may not) affect a lender's awareness of an unauthorized transfer (subto) and/or willingness to call due on sale:

(generally arranged from most likely to least)

Borrower (seller) or buyer communicating incorrectly with the bank/servicer

Small local banks or credit unions servicing the loan (often more attentive)

Missed or late payments after the property transfer

Property insurance policy changes

Loan is transferred to a new servicer (who notices and cares about the transfer)

Government-backed loans (FHA, VA, USDA, etc) may have less discretion on whether or not to accelerate

Lender mail that is sent to the property is returned as undeliverable

Multiple subject-to transfers on the same property

Lender performing occupancy verification (sending a door knocker to identify who's living in the home)

Down Payment Assistance lender/servicer monitoring utility records (discovery of whose name utilities are in)

DOS Guard continuously collects information on these factors as part of its ongoing risk management strategies.

While DOS Guard provides comprehensive protection, these best practices can further reduce risk:

Avoid unnecessary contact with the lender - use website chat (logged in as the borrower) rather than phone or email

Maintain perfect payment history (on-time or early payments; set up auto-pay)

If using a 3rd party servicer, actively monitor the mortgage statement for any changes in taxes and insurance, and make sure payment adjustments are made promptly

Ensure insurance coverage includes proper mortgagee clauses and conforms to the format demanded by the lender

Make sure both buyer and seller are coached in what not to say to the lender that might trigger an account review.

Remember that risk reduction is always best-effort and never guaranteed. DOS Guard was founded to provide the critical safety net for when best practice risk reduction just doesn't work out.

Yes, DOS Guard offers emergency consultation and due on sale remediation services even for properties without existing DOS Guard coverage.

Due on sale remediation is cheaper for properties that have a DOS Guard plan, but is still available to the public.

If you receive a due on sale notice, contact DOS Guard immediately (even if you don't have an active DOS Guard plan).

DOS Guard will triage the situation, give you immediate next-steps, and set up strategy/management calls.

If DOS Guard is unable provide a resolution for a due on sale loan acceleration event, and you have complied with program terms and conditions, DOS Guard will provide a full refund of the applicable fee.

DOS Guard's conditional money-back guarantee applies to the full cost of the DOS Guard Complete plan or the deductible portion of the Pro and Lite plans.

NOTE: Full terms and conditions are detailed in the DOS Guard service plan agreement.

The total financial impact can easily exceed $10,000 in consulting and legal fees. There is a potential for loss of the property to foreclosure and lawsuit(s) from a seller whose credit was damaged.

DOS Guard's services are designed to help mitigate these costs through prevention and strategic response if enforcement occurs.

For the Complete and Pro plans: Generally yes, but on a case-by-case basis, and DOS Guard may assess a transfer fee.

For the Lite plan: No.

DOS Guard plans are only transferrable for the same property and loan(s) originally covered, and cannot be transferred between properties.

Working with a DOS Guard Certified TC ensures your transaction aligns with due on sale risk reduction best practices.

A DOS Guard Certified TC (Transaction Coordinator) is a professional who has:

• Completed specialized training on due on sale risk management

• Demonstrated experience with creative financing transactions

• Been authorized to integrate DOS Guard services into closings

• Maintained compliance with DOS Guard's best practices and certification requirements

These professionals understand how to properly structure transactions to minimize due on sale risk and incorporate DOS Guard protection into your closing.

To find a DOS Guard Certified TC:

Visit our website's "Find a TC" directory (coming soon)

Contact [email protected] for a direct referral

Ask your existing TC if they're certified (or interested in becoming certified)

DOS Guard should be added to closing at least 2 weeks before COE to allow for additional document collection, communication with all parties, and addition of closing documents and invoices to closing. (DOS Guard is not available after closing without first getting a DOS Ready Assessment)

For a DOS Ready Assessment: 2 weeks. Information gathering and communication are the primary time constraint. If all materials and parties are available, a DOS Ready Assessment can be completed in 2-4 days.

DOS Guard coverage is for the life of the loan(s) taken subject to when the DOS Guard plan was purchased.

A DOS Guard plan may be transferrable on the same property, but cannot be transferred to another property.