[April]

I have a question concerning Demand Feature.

Mortgage Loan

Our Closing Disclosure says “does not have a demand feature”
The Note says under Lender Rights- “Upon default, Lender may declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then I will pay that amount.”
The Mortgage says under Rights and Remedies on Default “Upon the occurrence of an Event of Default and at any time thereafter, Lender, at Lender’s option, may exercise any one or more of the following rights and remedies, in addition to any other rights or remedies provided by law: Accelerate Indebtedness. Lender shall have the right at its option without notice to Grantor to declare the entire Indebtedness immediately due and payable, including any prepayment penalty that Grantor would be required to pay.

Consumer Loan

Disclosure says “ Demand. This obligation is payable on demand.”
Note says “Lender Rights. Upon default, Lender may declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then I will pay that amount”
Also under “General Provisions. This Note is payable on demand. The inclusion of specific default provisions or rights of Lender shall not preclude Lender’s right to declare payment of this Note on its demand.”
Security Agreement says “Lender’s Rights. If I am in default, this is what Lender may do, in addition to any other rights Lender may have: Accelerate Indebtedness. Lender may declare all Indebtedness immediately due and payable, without notice.”

I spoke with the president of the bank and he says the only time we will call a note due is if there is default. I feel our documents are contradictory and am unsure if Demand Feature is different than calling a note due because of default.

[rcooper]

A demand feature generally means the loan can be demanded to be paid by the lender at any time. Based on the information above it looks like your consumer note does have a demand feature and therefore the disclosure is accurate. I hesitate to make an assumption about your RE note.

Since you have questions I suggest you talk to an attorney to determine what is in your note or walk through how the note is set up in your loan origination software and what you have and have not included (e.g. demand feature). That might help you determine what is included.

[Author]

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