Tennessee Realtor State Practice Exam

Which of the following property transfers does federal law allow lenders to enforce an alienation clause?

1. Parent to child

2. Spouse to spouse

3. Between parties in a divorce settlement

4. Friend to friend

The correct answer is: Friend to friend

The correct choice aligns with the fact that federal law permits lenders to enforce an alienation clause during property transfers that are made as a gift or between unrelated parties. An alienation clause is a provision in a mortgage or deed of trust that allows the lender to require the borrower to pay the full loan balance if the property is sold or transferred. When property is transferred from one friend to another, it is typically an arms-length transaction, and lenders often include alienation clauses to protect their interests. In contrast, other options involve familial or marital relationships, where the transfer may not be considered an arms-length sale. Transfers between family members, such as parent to child or spouse to spouse, often fall under different regulations or exemptions that might not trigger the enforcement of an alienation clause. Similarly, property transfers in a divorce settlement usually have specific legal considerations and protections that could affect the lender's ability to enforce such a clause. Therefore, among the options provided, the transfer from friend to friend stands out as the scenario where the lender can readily invoke an alienation clause under federal law.