Escrow & Title
A Minnesota property has a 'due-on-encumbrance' clause in the mortgage. The homeowner takes out a second mortgage from a private lender. This may:
AAutomatically trigger the first mortgage to become due and payable✓ Correct
BHave no effect since it is a private loan
COnly matter if the combined loans exceed 80% LTV
DRequire county recorder notification but no lender notification
Explanation
Some Minnesota mortgages contain due-on-encumbrance clauses that can be triggered when the borrower places additional liens on the property without the first lender's consent. This is different from a due-on-sale clause, but the effect is similar - the first mortgage can be called due.
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