Bc5901 Assignment Of Mortgage
Recently, the issue of a lender's authority and right to pursue foreclosure on defaulted residential mortgage loans has become a subject of national interest. It is at the heart of the $25 billion settlement agreed to recently between the Federal government, 49 state attorneys general and the nation's five largest loan servicers.
Mortgage foreclosure practices are also the focus of suits brought by certain state attorney generals against several major banks in the past few months. The propriety of mortgage foreclosure processes are defenses commonly raised by defaulting borrowers in contested foreclosure litigation.
The courts are clogged with people asking the same question: does this bank have the right to foreclose on this home?
Two documents are critical to a residential lending relationship, and therefore to foreclosure on a defaulting borrower's loan: the note and the mortgage (or deed of trust).
The note identifies the amount of the loan, and the repayment terms. The mortgage provides security for the loan. To have the authority to foreclose the mortgage (what lawyers call "standing"), a plaintiff must be the "holder" or "assignee" of the note. In the current environment where mortgage loans have frequently been bought, sold and securitized, confusion has sometimes ensued over who is the proper party to commence the foreclosure — or at least over a bank's ability to prove its authority.
Counsel for borrowers often demand that lenders prove that both the note and mortgage are held by the foreclosing lender before a residential mortgage foreclosure may proceed, and some courts have, mistakenly, agreed. Certain courts have gone so far as to say that lenders who cannot provide exacting evidence of when and how the note and mortgage were transferred to the bank cannot maintain a foreclosure action, thereby allowing borrowers to reside at the mortgaged home "payment free," without making mortgage payments and without the risk of foreclosure.
Proving the right to foreclose, however, should not be as difficult as those attorneys and courts claim. Under the Uniform Commercial Code, a note is a negotiable instrument (just like a check), freely transferable by endorsement to a specific entity or by physical delivery of the note endorsed in "blank" to a new party, who becomes the "holder" of the note. The holder of the note (or check)whether or not he is the owner of the instrument can enforce it. Thus the party who "holds" the note has standing to enforce the note. This is no different from a check. You can receive a check payable to you and then endorse it by signing the back. If a check is payable to you, your signature on the back makes the check enforceable by any person in possession.
Here, however, is the important part when it comes to the transfer of a note. When a note has been transferred, the mortgage securing it automatically follows. This rule is codified in the UCC section 9-203. The maxim that the "mortgage follows the note" has been followed in most states, including Florida, New York, Ohio, Texas and California.
Though UCC law is long established, it is often forgotten or ignored in the mortgage foreclosure context. Applying this simple, clear rule to foreclosure cases would quiet much of the uproar about who has the right to foreclose because the focus would, correctly, be on the note only.
Disputes about whether mortgages were properly assigned to the foreclosing lender by Mortgage Electronic Registration System — commonly known as MERS — could be put to the side. Lenders designate MERS as their nominee and grant MERS the authority to transfer mortgages within its network of lenders, without recording the assignments publicly. MERS has become a favored whipping boy of borrower lawyers who regularly challenge the validity of mortgage assignments executed by or on behalf of MERS. But an assignment by MERS, and whether it legally transfers the mortgage or not, is irrelevant because possession of the endorsed note is all that matters.
Another issue that arises repeatedly is the claim that assignments of mortgages were "robo-signed." Borrowers claim that the mortgage assignments are invalid because they were improperly notarized or signed by someone without verifying the facts in the document. Again, this issue regarding the assignment of the mortgage does not affect the legal right of the lender to foreclose if the UCC is followed.
These issues regarding assignments and documentation of mortgage transfers have become serious distractions in many cases and on the national political stage, causing delay and expense for foreclosing parties, burdening courts unnecessarily and wastefully expending taxpayer money to address an "issue" which is not an issue at all.
Lawyers and judges need to keep their eye on the ball, and here all that is needed to prove the right and authority to foreclose is proper transfer and physical possession of the loan note.
Lenders would be well-served to check their files and confirm that they have possession of the original note, either endorsed in blank or endorsed specifically to them, before commencing their next foreclosure action. If a lender can walk into court waiving the original note, the lender has standing to foreclose and nothing about the assignment of the mortgage, robo-signing, faulty notary stamps, and so on, matter. If the lender has possession of a properly indorsed note, the law will do the rest.
David Dunn and Allison J. Schoenthal are partners at Hogan Lovells.
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