D1-4.1-05: Enforcing the Due-on-Sale (or Due-on-Transfer) Provision (11/08/2017)
- Kacey Olson
© Fannie Mae Single Family Servicing Guide
Introduction
This topic contains information on enforcing the due-on-sale (or due-on-transfer) provision.
Unless the transfer of ownership is an exempt transaction or involves a property that secures a “window-period” mortgage loan, the servicer must accelerate the debt.
The servicer must send any notices required under the terms of the mortgage loan and applicable law before it accelerates the debt. If the funds required to satisfy the debt are not received, the servicer should then begin foreclosure proceedings.
When the servicer learns that a transfer of ownership has occurred, it should notify the property purchaser that the mortgage loan is due and payable. For a whole mortgage loan or a participation pool mortgage loan held in Fannie Mae’s portfolio, the servicer should provide 30 days notice to the purchaser to pay the mortgage loan balance in full or to apply and qualify for a new mortgage loan. If neither is received within 30 days, the servicer should institute foreclosure proceedings. Under certain circumstances, Fannie Mae may consider the following alternatives:
- Waiver for mortgage loans in default. See Allowing a Delinquent Mortgage Loan to Be Assumed in D2-3.4-04, Qualifying Mortgage Assumption Workout Option (11/08/2017) for information on mortgage loan assumptions.
- Optional repurchase of certain mortgage loans. See A1-3-01, Requirements for Voluntary Repurchase (11/12/2014) for additional information.
- Potential litigation. If the legality of the due-on-sale (or due-on-transfer) provision is questioned or litigated, see D1-6-02, Handling Notices of Liens, Legal Action, Other Actions Impacting Fannie Mae’s Interest (07/12/2017) for Fannie Mae’s requirements for handling the action.