dragnet clause

dragnet clause

A clause in a mortgage loan that spreads a dragnet, which, in fishing, is a large net dragged across an area in order to capture everything it encounters. Similarly, a mortgage dragnet clause attempts to capture as much as possible for the lender.There are three types;some or all may appear in a mortgage loan. One seeks to make all debts of the borrower includable in the mortgage so that even a checking account overdraft may be deducted from sale proceeds when the property is sold. Another type attempts to extend the mortgage to other properties acquired by the borrower at a later date. In addition, a dragnet clause can provide that default in any other loans will constitute a default in the mortgage loan,even if the mortgage payments are current.Courts disfavor dragnet clauses and tend to scrutinize them very carefully in order to limit their reach,or sometimes they even find them unenforceable.If opposed to a dragnet clause in a promissory note or mortgage,one should request its deletion.

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For example, the traditional dragnet clause requires the provider to perform all the functions previously performed by the customer at the existing service levels (unless those functions are explicitly excluded).
Second, Dean Divina believes creditors "should not be allowed to hide behind a dragnet clause to conceal the true amount of the secured loan.
While the Supreme Court has upheld the validity of dragnet clauses, they are, in Dean Divina's opinion, unfair because (1) they may include loans incurred in the far future when the debtors may have already forgotten the dragnet clauses on their properties; (2) they prevent full disclosure to future lenders of the full extent of the debtors' credit worthiness; and (3) they deprive the government of the proper amount of documentary stamp taxes and mortgage registration fees.