Alienation Clause

DEFINITION of 'Alienation Clause'

A clause in a mortgage contract that requires full payment of the balance of a mortgage at the lender's discretion if the property is sold or the title to the property changes to another person. Nearly all mortgages have an alienation clause.

BREAKING DOWN 'Alienation Clause'

An alienation clause protects a lender by preventing a borrower from assigning debt without the lender's approval. An alienation clause protects the lender from credit risk of the original borrower, or third-party credit risk if the original borrower assigns the debt to another party.

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RELATED FAQS
  1. What is an alienation clause?

    Whether used in reference to insurance policies, mortgages or commercial loans, an alienation clause stipulates that should ... Read Answer >>
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