Under federal law, does a transfer of property to an ex-spouse due to divorce trigger acceleration under the due-on-sale clause?

• A. Always enforced.
• B. Enforced if the divorce decree explicitly requires the transfer.
• C. Not enforced; federal law provides exemptions for such transfers.
• D. Enforced if the transfer is for consideration.

Answer: (C)

The key idea is that federal law protects certain divorce-related transfers from triggering a mortgage’s due-on-sale clause. Under the Garn-St. Germain Act, a transfer of property to a spouse or former spouse incident to divorce is exempt from acceleration. That means the lender cannot invoke the due-on-sale clause simply because ownership is transferred as part of the divorce settlement. The loan can continue under its existing terms, and the ex-spouse may take title and/or assume the loan, or the loan may be refinanced, without the obligation being accelerated by the transfer itself. This exemption applies regardless of whether the transfer is for consideration or whether a divorce decree explicitly requires it.