Mortgage Assignment Laws
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What Is an Assignment of Mortgage?
A mortgage assignment, or “assignment of mortgage”, is a type of agreement where a borrower transfers their loan obligations to a third party. The newer lender “stands in the shoes” of the old lender and assumes the rights and duties associated with the mortgage agreement. This is similar to the idea of contract assignments in other areas of law.
When a mortgage assignment occurs, the bank or lending institution will usually want to retain some of their rights even after the transfer, such as their right to foreclose on the home in the event of non-payment. The bank’s rights may need to be recorded in a separate document from the one that assigns the mortgage to the third party.
What Are the Requirements for an Assignment of Mortgage?
The requirements for an assignment of mortgage is usually a document which includes all the information necessary to transfer the original lender or borrower to a third party. Banks usually assign the mortgage to new bank by selling and buying mortgages to each other. Assignments are required to contain the following information:
- The name of the assignor (current owner of the mortgage)
- The name of the assignee (the new owner taking the mortgage)
- The names of the borrowers
- The date of the mortgage
- The mortgage balance amount
- The original mortgage record information
- The property's legal description
The assignment of mortgage to the new entity must also be recorded in the same government office who handles the county records for that property. If the assignment is not properly recorded by the new entity, then they would not have the ownership right to foreclose. In some cases, an improper assignment of mortgage will not stop a foreclosure if the foreclosing party has the promissory note secured by the mortgage since the owner of the promissory note has the legal right to collect the debt.
Should Mortgage Assignments Be Recorded?
In order to prevent confusion or a “cloud” on the property title, it’s important that any mortgage assignments be recorded with the county recorder’s office. This is the place that stores and maintains records of property titles and transactions affecting deeds and titles.
Generally, a title search at the recorder’s office is supposed yield information as to whether there has been an assignment of mortgage rights. Any records of an assignment can affect subsequent legal proceedings, such as a foreclosure proceeding or a judicial lien hearing.
What Are Some Benefits and Drawbacks of Mortgage Assignments?
One of the main benefits of a mortgage assignment is that it may allow property that’s been on the market for a while to be sold. In many cases, mortgage assignments allow buyers to purchase a house without having to contact a bank or lending institution for a loan, since they can just have the previous party’s mortgage duties assigned to them.
Most banks understand the need for mortgage assignment and may even offer special packages for the transfer process.
On the other hand, one of the main drawbacks of mortgage assignments occurs where the assignment isn’t written down or recorded with the county. This can create confusion as to which parties are responsible for mortgage payments or for back debt payments. Also, non-payment of the monthly amounts owed can create issues, especially where the original lender was already in debt when they assigned the mortgage.
What Is the Difference between a Mortgage Assignments and a Transfer of the Note?
A loan transaction consists of two documents: a mortgage and a promissory note. There is a difference between a mortgage and a promissory note.
- Mortgage: A mortgage ( or a deed of trust) is the document that pledges the property as a security for the mortgage debt and allows the lender of the mortgage to foreclose on the property if borrower fails to make monthly payments.
- Promissory Note: A promissory note is a IOU document that evidences the borrowers promise to repay the loan debt. The owner of the promissory note has the legal right to collect the debt.
When a mortgage is transferred or assigned to a third party, the mortgage is then recorded by the new bank or lender who has right to collect the debt. The promissory note will also be signed over by the borrower. Homebuyers usually think the mortgage is the contract that is enforceable to collect a debt, however the promissory note contains the promise to repay the amount.
What Are Some Defenses to Mortgage Assignments?
Sometimes banks will sell or buy mortgages from other banks and the mortgage will be assigned to a new bank. The bank is required to record the mortgage assignment and also have the promissory note signed over to retain possession of the loan.
One defense a homeowner may use when the bank is foreclosing on the property is the "produce the note" defense. In this defense the homeowner is demanding the foreclosing bank to produce the original promissory note to prove that they are the true owner of the mortgage debt and has the legal right to foreclose. There are times when the new bank does not do the proper paperwork to prove that they own the note and the mortgage.
Do I Need a Lawyer for Help with Mortgage Assignments?
Like any mortgage contract, assignments generally require the assistance of a lawyer. Since they involve several different parties, mortgage assignments can sometimes be complicated. You may wish to work with a real estate lawyer in your area if you need assistance with a mortgage assignment or other legal issues. Also, if you will be purchasing a home, a lawyer can help you conduct a title search to determine if there are any outstanding assignments or debts associated with the property.
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Mortgage Assignment - How Real Estate Investors Profit
Mortgage assignment is a common practice among lenders. A mortgage deed, also called a deed of trust or trustee's deed or deed of trustee, gives a lender a security interest in the property mortgaged in return for money received. Lenders and mortgagors of deeds of trust often sell mortgages to third parties, like other lenders. If a trustee is assigning beneficial interest under a deed of trust, it should be recorded in writing. Mortgage assignment is a document that indicates that such an assignment of contract has happened. Once an assignment is recorded, a new lender stands in the shoes of the original lender.
Although a lender is not required to inform a borrower prior to mortgage assignment, s/he must send a notification after a mortgage sale has taken place informing the borrower how to make mortgage payments in the future. The borrower can negotiate mortgage terms with the new lender and seek mortgage modification.
A mortgage deed refers to a deed accompanied by a mortgaged loan note. Every mortgage deed involves two steps: a promissory note and a mortgage. A note has details like amount owed, term of loan, etc. and is proof of existence of a mortgage. The mortgage is the means through which a borrower pledges or mortgages property as security for money received. The note and mortgage are two sides of the same coin and are inseparable. A mortgage follows the note and thus assignment of mortgage note results in assignment of a mortgage. In other words, a mortgage cannot be assigned without transferring the note. Therefore, assignment of note and mortgage happen simultaneously.
Mortgage assignments are beneficial to both home sellers as well as buyers. For home sellers it can be an easy way to sell a home that has been on the market a long time. The benefit for home buyers is that they can buy a house without going through the process of qualifying for a bank loan and making a large down payment. There are many real estate companies offering attractive assignment programs that benefit sellers and buyers alike. Using the benefits of such a home mortgage assignment program will help you sell your home quickly or buy a home without dealing with bank formalities.
Once a mortgage has been transferred, it means that obligation of loan has transferred. In order to validly assign a mortgage, a mortgage assignment document should have the following details:
- description of the real estate so that there is clarity about the property
- the name of the original party as well as the third party
- contact information
- the date when the mortgage assignment became valid
Assignment of mortgage should be recorded before the government authority that deals with property ownership, property taxes, etc. If you are a borrower and you receive a notice that your mortgage has been transferred to another lender, you should get in touch with your lender and confirm it. You should also secure details of the person to whom the mortgage was sold to.
If you are a new lender and do not have a valid mortgage assignment document, you will be disadvantaged if you have to move for foreclosure. In the event mortgage payments stop, you may want to move the local court for foreclosure and take ownership of the property mortgaged. If there was no legal document created when you assign a mortgage, you will have no right to file for foreclosure. Therefore, it is important to document when you assign a mortgage. Click here to view our sample mortgage assignment form, also referred to as an assignment of mortgage form or mortgage assignment letter.
One drawback of mortgage assignment is that it all depends on a third party. For many, getting mortgages assigned is a kind of real estate investing practice. The third party to whom the mortgage is assigned to is a real estate investor who reaps the benefits of one of the party's desperateness. The investor third party is only concerned about reaping mortgage assignment profit from the mortgage assignment investing deal s/he has entered into and has no regard for the financial well being of the parties involved.
Mortgage Assignment FAQs
What is mortgage assignment?
Mortgage assignment, also called assignment of trustee's deed or assignment of deed of trustee, is the process of selling an existing mortgage to a third party. The borrower gets notice to make mortgage payments after the date of assignment of the mortgage deed to the new mortgagee. A mortgage assignment form satisfies lawful conveyance of the mortgage. An assignment of mortgage form also signifies that an assignment of contract has occurred and mortgage has been transferred.
Who can assign a mortgage?
A mortgage holder or a borrower can assign the mortgage to a third party. A lender can also assign a mortgage to another lender. In some cases, a homeowner can engage in assignment of mortgage, but the lender must give permission.
What are my benefits if I engage in HUD mortgage assignment program?
Homeowners can avoid foreclosure and can refinance their mortgage with the help of a mortgage assignment program offered by the U.S. Department of Housing & Urban development (HUD). In a real estate investing business, mortgage assignment program helps a real estate investor to sell his/her home really quickly.
What are the drawbacks of mortgage assignments?
There are a few drawbacks to assignment of a mortgage that you should be aware of. In case the buyer defaults on payments, you might have trouble collecting. Another disadvantage is that mortgage assignment depends on a third party-the new buyer, who is only concerned about getting mortgage assignment profit from a mortgage assignment deal.
Can you explain the process of mortgage assignment?
It is always advisable to utilize the services of a professional realtor or investor in the mortgage assignment investing business. Once you assign such a firm the task of mortgage assignment by signing a sales contract, they will do all the paperwork necessary for a mortgage assignment program. You will be required to submit additional documents related to the mortgage in order to assign the mortgage. The mortgage will then be advertised. Once a buyer is located, your realtor will require you to sign remaining paperwork and will prepare closing documents.
Documents required for a mortgage assignment are:
- loan details including loan number, loan type and terms of loan
- an authorization to discharge Loan Information
- purchase contract and addendum to contract identifying conditions of mortgage assignment
- seller's disclosure document
- mortgage assignment letter
- document assigning insurance contract
- an acknowledgement document by seller
- mortgage modifications, if any