"What About The Due On Sales Clause?"

Our company puts the property into a Land Trust which protects it from any sort of due on sale clause. The Declaration of Trust document, which establishes a Land Trust, remains a private legal instrument, not publicly recorded. Within this framework, the Trustee of the Land Trust has the latitude to assert that a change in ownership has transpired for the explicit purpose of estate planning. This maneuver falls within the exceptions articulated in the Garn-St. Germain Depository Institutions Act, a federal law that delineates certain scenarios exempt from the typical enforcement of due-on-sale clauses found in mortgage agreements.

Another approach to the due-on-sale clause, we execute a strategy of deeding the property back to the original owner and establishing either a land contract or an executory contract.

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Eligibility & Entitlement For A Subject To Transaction:

Understanding Credit and DTI Ratio for Buying a New Property or Qualifying for a New Loan

The Fannie Mae selling guide covers this topic specifically:

“When a borrower is obligated on a mortgage debt - but is not the party who is actually repaying the debt - the lender may exclude the full monthly housing expense (PITIA) from the borrower’s recurring monthly obligations."

This part of the statement means that there are cases in which a person's name is on the mortgage documents, making them legally responsible for the mortgage debt (obligated borrower), but they are not the ones actually making the monthly mortgage payments. This could happen in various situations. For example: the borrower might co-sign the mortgage for someone else, like a family member or friend, or they might own the property with another person who is responsible for making the payments.

The lender may exclude the full monthly housing expense (PITIA) from the borrower’s recurring monthly obligations:

In the context of assessing a borrower's eligibility for a new loan, such as a mortgage, lenders typically look at the borrower's recurring monthly obligations. These obligations include existing debts, such as credit card payments, car loans, and other financial commitments. However, in the situation described in the statement, where the obligated borrower is not making the mortgage payments, the lender may choose to exclude the full PITIA (monthly housing expense) from the list of the borrower's financial obligations.

This exclusion means that the lender does not count the full mortgage payment (PITIA) as a financial obligation when evaluating the borrower's ability to take on additional credit. This can be beneficial for the obligated borrower because it reduces their debt-to-income ratio, which is an important factor in loan approvals. As a result, the borrower may have a better chance of qualifying for a new loan since their financial obligations appear lower on paper. However, it's important to note that this doesn't change the obligated borrower's legal responsibility for the mortgage debt; it's only a consideration in the loan application process.

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