Yesterday’s topic in Real Estate Law was Due-On-Sale clauses in mortgages. These clauses allow a lender to demand repayment of the entire loan amount upon the sale of property:
Professor E: “The game was hiding the sale from the lender. Every market had a few lawyers that people knew would be willing to do this. So people who wanted to cheat their lenders would go to these lawyers…well, I guess saying “cheat” is a value judgment isn’t it? So anyway they would go to these lawyers to cheat their lenders…”
Jill: “Wait! You seem to be implying it is wrong to do this.”
Professor E: “You’re right!”
This triggered a 10 minute discussion on the ethics of lawyers helping clients hide transfers of property interests from lenders.
Professor E: “Wow, maybe this is an avoidance of the next topic because I’ve never had so much participation!”
And she was right. The next topic was mortgage backed securities. Eek.
Other OTR posts with Professor E:
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