Which of the following describes a clause that requires full mortgage payment upon the sale of the property?

The correct choice refers to a clause that addresses the responsibilities of a borrower in relation to their property when it is sold. An alienation clause, sometimes called a due-on-sale clause, stipulates that if the property is sold or transferred, the lender has the right to demand the full outstanding balance of the mortgage. This means that upon selling the property, the borrower must either pay off the mortgage completely or face the risk of default.

Alienation clauses protect lenders by ensuring they retain the ability to collect the full debt owed upon the transfer of property ownership. This can be particularly significant because the original loan terms may be more favorable than those available to new borrowers at the time of sale.

In contrast, other clauses mentioned serve different purposes. For instance, an escrow clause refers to an arrangement where certain payments, such as taxes and insurance, are held by a third party before being paid to the respective entities. A subordination clause involves the prioritization of loans, typically where a second mortgage is assigned lower priority compared to the first. Lastly, a prepayment clause outlines conditions under which a borrower may pay off their mortgage early, which may include penalties or restrictions. Each of these clauses has a distinct role in mortgage agreements, but it is the alienation