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15. What would the attorney's best advice be?
The landowner and the neighbor consulted an attorney about their proposed transaction, their desire to complete it, and the bank's refusal to consent.
Subsequently, the landowner wanted to sell the land to a neighbor by an installment land contract, but the bank refused to consent. The neighbor's credit was good, and all mortgage payments to the bank were fully current.
A landowner mortgaged her land to a nationally chartered bank as security for a loan. The mortgage provided that the bank could, at its option, declare the entire loan due and payable if all or any part of the land, or an interest therein, was sold or transferred without the bank's prior written consent.
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B is incorrect. A due-on-sale clause in a mortgage granted to a nationally chartered bank is valid and is not an illegal restraint on alienation. The Garn-St. Germain Depository Institutions Act preempts any state law to the contrary. If the landowner conveys the land without the bank's prior consent, even by installment land contract, the bank may properly accelerate the mortgage debt.
C is incorrect. The landowner may sell the land by an installment land contract. Such a sale would be a transfer, however, which would allow the bank to accelerate the debt if the prior consent of the bank had not been received. It is irrelevant whether the mortgage payments are current at the time of the land contract execution.
D is incorrect. The proposed transfer will not make the neighbor personally liable on the debt. The neighbor would be personally liable on the mortgage debt only if the neighbor expressly assumed the mortgage debt. If the transfer to the neighbor is made without the bank's consent, even if by installment land contract, the bank may accelerate the mortgage debt. If the entire debt is not then paid, the bank could bring a foreclosure proceeding.