It has been estimated that as of 1981 there were at least 55 million home owners in the United States with an average equity of $34,000 each, and a combined total equity in their homes of 1.89 trillion dollars. It can be safely assumed that the purchase of a family home is the largest single transaction which an American makes in his or her lifetime, whether married or single. Thus, the question of the continued viability of the average American’s dream of home ownership, the appropriate legal controls on the home purchase transaction, and the permissible restraints on subsequent alienability of the home when purchased present legislatures and courts with issues of law and policy of far-reaching ramifications.
In the last few years, the Congress and Supreme Court of the United States have made substantial changes in the field of mortgage law. In quick succession, the U.S. Supreme Court in Fidelity Federal Savings & Loan Assoc. v. De La Cuesta and the U.S. Congress with the Garn-St. Germain Depository Institutions Act of 1982 (Garn Act) apparently swept away the highly developed preexisting state law on the “due-on-sale” clause in mortgages, trust deeds, notes, and installment contracts for the sale of land. In effect, the legislative and judicial branches of the federal government have declared that the “due-on-sale” clause is effective in any land transfer instrument, under virtually any circumstances “[n]otwithstanding any provision of the constitution or laws (including the judicial decisions) of any State to the contrary. . ..”
The purpose of this Comment is to outline the major changes in due-on-sale enforcement as dictated by the Garn Act and De La Cuesta. Moreover, the current state of the law in Washington regarding due-on-sale enforcement is analyzed; constructive strategic suggestions for those faced with post-Garn enforcement problems are given. The Comment concludes that: (1) the vast scope of the federal preemption was an overreaction to the financial distress of the nation’s thrift industry; (2) equity requires that these changes be enforceable only in loans originated after the Garn Act; and (3) that state law still has a vital role in due-on-sale clause enforcement.