Which clause in a mortgage loan would prevent the use of a wraparound mortgage?

The due on sale clause is a provision in a mortgage that allows the lender to require the borrower to pay the entire loan balance upon the sale or transfer of the property. This clause is significant because it prevents the assumption of the existing mortgage by a new buyer, which is essential for a wraparound mortgage to work.

In a wraparound mortgage, a new loan is created that "wraps around" an existing mortgage, and the new borrower makes payments to the seller, who then continues to pay the original lender. However, if the original mortgage includes a due on sale clause, the lender can call the entire loan due immediately upon the sale, effectively blocking the ability to use a wraparound mortgage. Therefore, the presence of a due on sale clause is what directly affects and prohibits the implementation of a wraparound mortgage structure.