**§36.4308 Transfer of title by borrower or maturity by demand or
acceleration.**

\(a\) Except as provided by paragraphs (b) or (c) of this section the
conveyance of or other transfer of title to property by operation of law
or otherwise, after the creation of a lien thereon to secure a loan
which is guaranteed or insured in whole or in part by the Secretary,
shall not constitute an event of default, or acceleration of maturity,
elective or otherwise, and shall not of itself terminate or otherwise
affect the guaranty or insurance.

\(b\) (1) The Secretary may issue guaranty on loans in which a State,
Territorial, or local governmental agency provides assistance to a
veteran for the acquisition of a dwelling. Such loans will not be
considered ineligible for guaranty if the State, Territorial, or local
authority, by virtue of its laws or regulations or by virtue of Federal
law, requires the acceleration of maturity of the loan upon the sale or
conveyance of the security property to a person ineligible for
assistance from such authority.

\(2\) At the time of application for a loan assisted by a State,
Territorial, or local governmental agency, the veteran-applicant must be
fully informed and consent in writing to the housing authority
restrictions. A copy of the veteran's consent statement must be
forwarded with the loan application or the report of a loan processed on
the automatic basis. (Authority: 38 U.S.C. 3703(c))

\(c\) Any housing loan which is financed under 38 U.S.C. chapter 37 and
to which section 3714 of that chapter applies, shall include a provision
in the security instrument that the holder may declare the loan
immediately due and payable upon transfer of the property securing such
loan to any transferee unless the acceptability of the assumption of the
loan is established pursuant to section 3714.

\(1\) A holder may not exercise its option to accelerate a loan upon:

> \(i\) The creation of a lien or other encumbrance subordinate to the
> lender's security instrument which does not relate to the transfer of
> rights of occupancy in the property;
>
> \(ii\) The creation of a purchase money security interest for
> household appliances;
>
> \(iii\) A transfer by devise, descent, or operation of law on the
> death of a joint tenant or tenant by the entirety;
>
> \(iv\) The granting of a leasehold interest of three years or less not
> containing an option to purchase;
>
> \(v\) A transfer to a relative resulting from the death of a borrower;
>
> \(vi\) A transfer where the spouse or children of the borrower become
> joint owners of the property with the borrower;
>
> \(vii\) A transfer resulting from a decree of a dissolution of
> marriage, legal separation agreement, or from an incidental property
> settlement agreement by which the spouse of the borrower becomes the
> sole owner of the property. In such a case the borrower shall have the
> option of applying directly to the Department of Veterans Affairs
> regional office of jurisdiction for a release of liability in
> accordance with §36.4323 of this part; or
>
> \(viii\) A transfer into an inter vivos trust in which the borrower is
> and remains a beneficiary and which does not relate to a transfer of
> rights of occupancy in the property.

\(2\) With respect to each such loan at least one of the instruments
used in the transaction shall contain the following statement: "This
loan is not assumable without the approval of the Department of Veterans
Affairs or its authorized agent." This statement must be:

\(i\) Printed in a font size which is the larger of:

> \(A\) Two times the largest font size contained in the body of the
> instrument; or
>
> \(B\) 18 points; and

\(ii\) Contained in at least one of the following:

> \(A\) The note;
>
> \(B\) The mortgage or deed of trust; or
>
> \(C\) A rider to either the note, the mortgage, or the deed of trust.
> Authority: (38 U.S.C.3714(d))

\(d\) The term of payment of any guaranteed or insured obligation shall
bear a proper relation to the borrower's present and anticipated income
and expenses, (except loans pursuant to 38 U.S.C. 3710(a)(8) or
(9)(B)(i)). In addition the terms of payment of any guaranteed or
insured obligation shall provide for discharge of the obligation at a
definite date or dates or intervals in amount specified on or computable
from the face of the instrument. A loan which is payable on demand, or
at sight, or on presentation, or at a time not specified or computable
from the language in the note, mortgage, or other loan instrument, or
which contemplates periodic renewals at the option of the holder to
satisfy the repayment requirements of this section, is not eligible for
guaranty or insurance, except as provided in paragraph (f) of this
section.

\(e\) No guaranteed or insured obligation shall contain a provision to
the effect that the holder shall have the right to declare the
indebtedness due, or to pursue one or more legal or equitable remedies,
if holder "shall feel insecure," or upon the occurrence of one or more
such conditions optional to the holder, without regard to an act or
omission by the debtor, which condition by the terms of the note,
mortgage, or other loan instrument would at the option of the holder
afford a basis for declaring a default.

\(f\) Notwithstanding the inclusion in the guaranteed or insured
obligation of a provision contrary to the provisions of this section,
the right of the holder to payment of the guaranty or insurance shall
not be thereby impaired: *Provided,*

> \(1\) Default was declared or maturity was accelerated under some
> other provision of the note, mortgage, or other loan instrument, or

\(2\) Activation or enforcement of such provision is warranted under
§36.4317 (a), or

> \(3\) The prior approval of the Secretary was obtained. (Authority: 38
> U.S.C. 3703(c))

\(g\) The holder of any guaranteed or insured obligation shall have the
right, notwithstanding the absence of express provision therefor in the
instruments evidencing the indebtedness, to accelerate the maturity or
such obligation at any time after the continuance of any default for the
period specified in §36.4316.

\(h\) If sufficient funds are tendered to bring a delinquency current at
any time prior to a judicial or statutory sale or other public sale
under power of sale provisions contained in the loan instruments to
liquidate any security for a guaranteed loan, the holder shall be
obligated to accept the funds in payment of the delinquency unless:

\(1\) The prior approval of the Secretary is obtained to do otherwise,
or

\(2\) Reinstatement of the loan would adversely affect the dignity of
the lien or be otherwise precluded by law.

A delinquency will include all installment payments (principal,
interest, taxes, insurance, advances, etc.) due and unpaid and any
accumulated late charges plus any reasonable expenses incurred and paid
by the holder if termination proceedings have begun (e.g., advertising
costs, foreclosure costs, attorney or trustee fees, recording fees,
etc.). (Authority: 38 U.S.C. 501(a), 3703(c), 3712(g))

(Approved by the Office of Management and Budget under OMB control
number 2900-0516)

\[13 FR 7739, Dec. 15, 1948, as amended at 15 FR 4397, July 12, 1950; 43
FR 53728, Nov. 17, 1978; 46 FR 43673, Aug. 31, 1981; 46 FR 51386, Oct.
20, 1981; 50 FR 3335, Jan. 24, 1985; 55 FR 37476, Sept. 12, 1990; 55 FR
39404, Sept. 27, 1990; 68 FR 6627, Feb. 10, 2003\]

**Supplement *Highlights* reference**: 26(1)