Freddie Mac Single-Family Seller/Servicer Guide 4101.9 — Due-on-sale provisions

Freddie Mac Single-Family Seller/Servicer Guide 4101.9 — Due-on-sale provisions

Effective 2025-07-09 · Freddie Mac's stamp for this section

This section contains requirements related to: ■ Description of due-on-sale clauses ■ Types of due-on-sale clauses ■ Summary of due-on-sale characteristics ■ Exceptions for applicable laws and certain circumstances (a) Description of due-on-sale clauses The “due-on-sale” clauses in the Uniform Instruments include provisions governing whether the loan will be accelerated if the Borrower sells or transfers the Mortgaged Premises or any interest in the Mortgaged Premises, or whether instead the loan may be assumed by a third party who acquires the Mortgaged Premises or any interest in the Mortgaged Premises by sale or transfer. Uniform Instruments for different Mortgage products may have different due-on-sale clauses. The type of due-on-sale clause set forth in the Uniform Instruments used to originate a particular Mortgage determines whether the Mortgage is assumable by the party to whom the Mortgaged Premises is transferred. The Uniform Instruments used in connection with the origination of ARMs contain due-onsale provisions governing whether the loan will be accelerated if the Borrower sells or transfers the Mortgaged Premises or any interest in the Mortgaged Premises, or whether instead the loan may be assumed by a third party who acquires the Mortgaged Premises or any interest in the Mortgaged Premises. (b) Types of due-on-sale clauses Due on sale clauses Type Description Nonassumable during the life of the loan Some due-on-sale clauses provide that the lender will require immediate payment in full of all sums secured by the Security Instrument (generally referred to as accelerating the loan) if the Borrower sells or transfers the Mortgaged Premises. The effect of this type of due-on-sale clause is that the Mortgage is nonassumable for the life of the loan. The Uniform Instruments used with fixed-rate Mortgages include this type of due-on-sale clause. Assumable during the life of the loan Some due-on-sale clauses state that the lender will not accelerate the loan if the lender evaluates the proposed sale or transfer as if a new loan were being made to the intended transferee, and if the lender determines the lender’s security would not be impaired by the loan assumption. The effect of this type of due-on-sale clause is that the Mortgage is assumable for the life of the loan. Freddie Mac makes available ARM Uniform Instruments for all ARM indices that include this type of dueon-sale clause. Assumable until a specified event, then nonassumable Some due-on-sale clauses provide that the loan is assumable until the occurrence of a specified event, but after that specified event has occurred, the loan is nonassumable. Nonassumable during a specified period of time and assumable thereafter Some due-on-sale clauses provide that during an initial specified period of time, the loan is nonassumable, but after that specified period of time, the loan is assumable provided certain conditions are met. With respect to an ARM, the specified period of time is the end of the Initial Period. ARMs must be assumable during the entire period during which the interest rate is adjustable. Freddie Mac makes available ARM Uniform Instruments for 6-Month SOFR-indexed ARMs that include this type of due-on-sale clause, and the Mortgages become assumable after the end of the Initial Period when the Note Rate begins to adjust. Nonassumable during a specified period of time and thereafter assumable until a specified event, and then nonassumable Some due-on-sale clauses include the following information: ■ An initial specified period during which the Mortgage is nonassumable ■ A statement that the loan is assumable after the initial specified period and provided certain conditions are met, and ■ A statement that the loan is nonassumable upon the occurrence of a specified event (c) Summary of due-on-sale characteristics Fixed-rate Mortgages must be originated as follows: ■ For all fixed-rate Mortgages other than those listed in the bullet below, on Uniform Instruments that provide for the Mortgage to be nonassumable ■ For fixed-rate assumable Mortgages sold under the Guarantor program, on Uniform Instruments that provide for the Mortgage to be nonassumable and were executed with a Note Addendum and a Security Instrument Rider that provide for the Mortgage to be assumable subject to certain conditions (an “Assumable Mortgage”). The Note Addendum and Security Instrument Rider are available on Freddie Mac’s Uniform Instrument webpage at https://sf.freddiemac.com/tools-learning/uniforminstruments/2021-updated-instruments. ■ The Seller must obtain Freddie Mac’s written approval before selling Assumable Mortgages to Freddie Mac by contacting its Freddie Mac representative or Customer Service at 800-FREDDIE All 6-Month SOFR-indexed ARMs may be originated on Uniform Instruments that provide either for the Mortgage to be assumable during the life of the Mortgage or for the Mortgage to be nonassumable during the Initial Period and assumable thereafter. For eligible Mortgage products that are not originated on Uniform Instruments, such as FHA and VA Mortgages, the due-on-sale characteristics may be different from those specified above. (d) Exceptions for applicable laws and certain circumstances Regardless of the type of due-on-sale clause stated in the Uniform Instrument used to originate a Mortgage, Freddie Mac will permit a Mortgage, which under its terms is nonassumable, to be assumed if required by federal or State law or under the circumstances as described in Sections 8406.1(d) and 8406.2(a).

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