24 CFR §1005.423

1. (a)Legal Restrictions on Conveyance means any provision in any legal instrument, law, or regulation applicable to the Borrower or the mortgaged property, including but not limited to a lease, deed, sales contract, declaration of covenants, declaration of condominium, option, right of first refusal, will, or trust agreement, that attempts to cause a conveyance (including a lease) made by the Borrower to:
   1. (1)Be void or voidable by a third party;
   2. (2)Be the basis of contractual liability of the Borrower for breach of an agreement not to convey, including rights of first refusal, pre-emptive rights or options related to Borrower efforts to convey;
   3. (3)Terminate or subject to termination all or a part of the interest held by the Borrower in the property if a conveyance is attempted;
   4. (4)Be subject to the consent of a third party;
   5. (5)Be subject to limits on the amount of sales proceeds retainable by the seller; or
   6. (6)Be grounds for acceleration of the Guaranteed Loan or increase in the interest rate.
2. (b)Section 184 Guaranteed Loans shall not be subject to any Legal Restrictions on Conveyance, except for restrictions in paragraphs (b)(1) through (4) of this section:
   1. (1)A lease or any other legal document that restricts the assignment of interest in properties held in trust or otherwise restricted to an eligible Indian Family.
   2. (2)A mortgage funded through tax-exempt bond financing and includes a due-on-sale provision in a form approved by HUD that permits the Direct Guarantee Lender to accelerate a mortgage that no longer meets Federal requirements for tax-exempt bond financing or for other reasons acceptable to HUD. A mortgage funded through tax-exempt bond financing shall comply with all form requirements prescribed under this subpart and shall contain no other provisions designed to enforce compliance with Federal or State requirements for tax-exempt bond financing.
   3. (3)A mortgaged property subject to protective covenants which restrict occupancy by, or transfer to, persons of a defined population if:
      1. (i)The restrictions do not have an undue effect on marketability as determined in the original plan.
      2. (ii)The restrictions do not constitute illegal discrimination and are consistent with the Fair Housing Act and all other applicable nondiscrimination laws under Tribal, Federal, State, or local law, where applicable.
   4. (4)HUD shall require that the previously approved restrictions automatically terminate if the lease or title to the mortgaged property is transferred by foreclosure, deed-in-lieu/lease-in-lieu of foreclosure, or if the loan is assigned to HUD.