Real estate loan question : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Looking at a "country purchase" in the lower 48; unfortunately, we need to borrow some money. Has anyone seen an "equity clause" in loans, namely the ability of the lending institution to demand full payment immdediately if real estate prices collapse? I have run into loan officers in the lower 48 who have never heard of this provision. In Alaska, where banks were turned into dance studios and ice cream parlors in the 1980's when oil collapsed (heard the same thing happened in Houston), the loan officers are quite familiar with this provision.

I understand it's written in small print in nearly all mortgages; people just aren't aware of it. Thanks; I trust folks can see its relation to Y2K.

-- Nelson Isada (, October 30, 1999



What state are you in and what state are you going to buy in?

-- Uncle Bob (UNCLB0B@Y2KOK.ORG), October 30, 1999.

Live in Alaska; in-laws live in rural Virginia - look out Paul Milne! ;)

-- Nelson Isada (, October 30, 1999.

Nelson, there is a good property next door (or very close; can't remember) to Paul Milne for sale. eMail him!

Paul Milne

-- Ashton & Leska in Cascadia (, October 30, 1999.

oops, those < things erase text:

Paul Milne (

-- A & L (, October 30, 1999.


Laws differ from state to state. Each state has a Department of Real Estate, and they usually have a web site. You may call or go to the web site and ask the question.

-- Uncle Bob (UNCLB0B@Y2KOK.ORG), October 30, 1999.

Thanks for the feedback. Although I was initially shocked by the possibility of an equity call option, it makes sense if I were a lender. I just wonder if it's buried deeply in US Code xxxx as part of RESPA/HUD regs, so that it doesn't have to be included in a standard contract (similar to UCC).

-- Nelson Isada (, October 30, 1999.

If this was the case, the whole southern half of CA would have been called due in the early 90's. Pay your mortgage payment and no one will come knockin.

-- Bill (, October 30, 1999.

If you get a loan through a standard mortgage banker rather than a bank then your note will most likely be a standard Fannie Mae note secured by either a mortgage or deed of trust - none of which will contain such provisions.

If you get a loan from the local Bubba's Bank of Commerce then they may have their own custom notes with non-standard verbiage.

BTW - if property values collapse you may want to walk away from the current property and pick up a nicer one down the road in foreclosure for less money. Just close on the new property before getting behind in your payments. Many states have a "single action" rule on real estate which allows the lender to either go after you personally or go after the property for recourse. Then lender will almost always choose to go for the property.


-- Russell (, October 31, 1999.

Thanks all for info.

-- Nelson Isada (, October 31, 1999.

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