A Mortgage Loan Demand Feature

What is a "Demand Feature" on the TIL (Truth In Lending)?

1 Answer

A "demand feature" refers to the ability of a mortgage lender to declare a loan due and payable "on demand." It's seems sort of silly that that's even part of the form since demand features are all but unheard in all but business settings.

Things weren't always like that, however. Before the Great Depression, just about every loan out there had a demand feature. When banks -- which are nowhere nearly as regulated as they are today -- started to see the value of their stock market investments go down, they called up their borrowers and said "Hey Joe, we need you to pay off your mortgage, NOW!" If someone couldn't, the bank would foreclose. That's why so many people still think it's best to have a house that's paid off: if it's paid off, the bank can't take it.

Nowadays, the bank will only take your home if you don't make your payments, giving you the opportunity to use the equity in your home as a financial planning and investment tool. How things have changed!