Loan Officer Practice Exam 2025 – Comprehensive All-in-One Guide for Exam Success!

The type of clause that prevents someone from assuming a mortgage loan without the lender's permission is known as an alienation clause. This clause is included in mortgage contracts to give lenders control over who can assume the loan. By including an alienation clause, the lender ensures that the original borrower cannot transfer the mortgage obligation to another party without the lender's explicit consent. This is important for lenders because they want to assess the creditworthiness of any new borrowers who take over the loan and to ensure that these new borrowers are capable of continuing the payments.

While other clauses have their own specific functions — such as the power of sale clause, which allows lenders to initiate foreclosure proceedings without court approval, the loan assumption clause which specifically allows the assumption of the loan under certain conditions, and the due-on-sale clause that requires the borrower to pay off the loan if the property is sold — the alienation clause is specifically designed to restrict unauthorized assumption of the mortgage by another party. Thus, it clearly fulfills the role of preventing someone from taking over a loan without the lender's permission.