How court mortgage ruling affects buyers, sellers, lenders

A sweeping decision by the Supreme Court will force a great many Americans and at least two key industries to rethink their financial plans.

Americans trying to buy or sell homes, the agents who help them, and bankers who lend mortgage money -- all are affected in different ways by the ruling, delivered Monday.

No longer, said the court, can home sellers count on transferring their low-interest mortgages to potential buyers, even in those states that had passed laws to permit this.

All federally chartered thrift institutions -- the major source of mortgage money -- now can enforce ''due on sale'' clauses, requiring a home seller to pay off his mortgage in full when the home is sold.

The ruling does not apply to state-chartered savings-and-loan associations, numbering more than 2,000 of the nation's 4,600 thrifts. A state-chartered institution, however, can easily acquire a federal charter, thereby coming under the Supreme Court ruling.

In today's housing market, where mortgage rates average 17.5 percent, the ability of new homeowners to assume existing mortgages has fostered the sale of hundreds of thousands of homes that otherwise might not have been sold, according to real estate experts.

''In 1981,'' says Bill Ellingsworth of the National Association of Realtors, ''2.3 million existing homes were sold. Of these, 42 percent had assumable loans.''

The Supreme Court's 6-to-2 ruling arose from a California case where an S&L tried to foreclose on two ''due on sale'' mortgages. At issue was a conflict between federal and state regulations covering the resale of existing homes.

In 1976 the Federal Home Loan Bank Board, the regulatory agency for more than 2,000 federally chartered S&Ls, gave these lenders the right to include a ''due on sale'' clause in mortgages.

Eighteen states, concerned with the rights of home sellers and buyers, overrode the federal regulation and denied S&Ls the right to enforce the clause.

Thousands of home sales in these states were subsequently made, in contradiction of the ''due on sale'' clause, under the protective umbrella of state law.

Now the Supreme Court has ruled against the 18 states that had put their mortgage law or regulation above that of the Home Loan Bank Board in the case of federally chartered thrift institutions.

Because the ruling is retroactive, S&Ls could presumably challenge transactions made since 1976 that ignored ''due on sale'' clauses in contracts.

Will this cause a rush to the courts? ''The answer is probably no,'' says James W. Christian, chief economist of the United States League of Savings Associations. He cites the ''terrific legal tangle'' that would erupt over homes that had been sold and resold a number of times.

The S&L industry is as happy with the ruling as real estate brokers are distressed. Both industries are in deep trouble, with high interest rates the root cause.

Dr. Christian says the bulk of S&L mortgage assets are in the form of long-term, fixed-rate mortgages at rates of less than 10 percent. To attract fresh deposits, S&Ls have to compete with banks and money market funds by offering savers interest rates well above 10 percent.

The result has been steady attrition among S&Ls. As many as 500 may have disappeared, through merger or otherwise, since the end of 1980, according to industry officials. The trend continues.

Real estate brokers also are hard-hit by high interest rates, because -- except for assumable mortgage deals -- many potential home buyers cannot afford houses.

Hundreds of thousands of Americans, meanwhile, are stuck with houses they cannot sell. With assumable mortgages in many cases ruled out, sales of existing homes may drop further.

Already, says Mr. Ellingsworth, the annualized sales rate of existing homes has been below the 2 million mark for eight straight months. And he forecasts a 1982 result well below the 2.3 million sales of 1981.

State-chartered S&Ls, unaffected by the Supreme Court ruling, are likely to press their state governments to grant them the right to enforce ''due on sale'' clauses.

The Supreme Court ruling may encourage wider use of what are called ''blended rate'' mortgages. An S&L eager to clear its books of an old low-interest mortgage offers a buyer a mortgage at 13 to 14 percent -- higher than the 8 percent of the old mortgage, but below the prevailing 17.5 percent market rate.