An assignment of mortgage is a common practice in the real estate sector, which home buyers and mortgage borrowers may or may not be aware of. This is a simple process through which the mortgage lender sells off the mortgage note to a secondary lender or investor. When this happens, the borrower becomes liable to continue making their payments to the new mortgage note holder instead of the original lender. Though it may sound intimidating, it is actually a routine process, which we will examine in detail in this article.
Meaning Of Assignments Of Mortgage
A type of legal tool which transfers the mortgage note onto another private investor or a government sponsored enterprise is known as an assignment of mortgage. A new lender can purchase the mortgage loan (and with it the mortgage itself) from the original lender through this process. It is important to note that during the process of mortgage closing, the borrower signs an agreement which empowers the lender to transfer the mortgage on to another. This means that for assignment of mortgage, the lender does not need to specifically consult the borrower in advance.
The transfer of the note signifies the transfer of rights on the collateral (which is your property for which you have secured the mortgage). They also get legal security and rights over the property in the event the borrower defaults on the loan. This means that if the borrower fails to repay the loan as per the terms of the mortgage, the new lender can effectively repossess the property or seek judicial help in trying to sell it to make up for the loss.
When Is It Created
The assignments of mortgage can happen at any time after the mortgage contract is closed. Whether the original lender immediately transfers it on to a new investor or after a while when they find one, the assignments of mortgage can take place through the duration of the loan.
Through this tool, the original lender essentially just passes off the loan to another interested investor to remake his money quickly, and further extend his lending services to other potential borrowers.
Also read: Mortgage Note: What It Is and How It Works
The original mortgage lender regains liquid funds which he can use for new clients.
An assignment of mortgage is only considered complete when the mortgage note is provided to the new lender, because in its absence, the new lender would have no legal right to take any action in case of the borrower’s default.
However, it is important to note that about 20 US states require deeds of trust in place of or in addition to a mortgage. In these states, for the purpose of transferring the loan to another investor, the original lender only needs to endorse the note to the new lender. This simple endorsement transfers the security interest.
This is because a deed of trust does not require any judicial process in the event the borrower defaults on the loan, and the lender chooses to sell the property. The same rights are transferred on to the new lender as well, and no judicial intervention is needed.
It is also important to note that although the lender does not require the borrower’s permission or provide any advance notice of assignment of mortgage, they do have the duty of informing the borrower about the transaction once the assignment is completed. This is necessary in order to enable the borrower to direct his payments to the new lender.
Information Contained In Assignment of Mortgage
An assignment of mortgage consists of various details regarding the borrower and the loan. These details help the lender in identifying the particular mortgage which is being transferred to a new lender or investor. Some of the main details which are covered in this document include:
- Dates of the mortgage including beginning of the term and date of final payment and mortgage closing.
- The state and jurisdiction where the mortgage agreement has been entered into and recorded. This helps in understanding the legal rights and duties for the lender.
- The name of the borrower of the mortgage which helps in knowing whom the repayments have to be made by, and whose property the mortgage is pertaining to.
- Information about the specific property for which the mortgage was secured, and which is being held as collateral until the mortgage is completely paid off by the borrower. The specifications can include information like property location, dimensions, and more.
- The total sum which the borrower had taken as mortgage loan from the lender. This clause can also include information like how much money has been paid back and how much is remaining which the new lender should be receiving from the borrower.
Does Assignment Of Mortgage Have Negative Impacts?
In general, assignments of mortgage have no impact on the borrower. The terms of the mortgage contract remain the same. This means that the interest rate, type, and by extension, the monthly payment requirements remain the same for the borrowers. They do not need to worry about having to pay more or changing the duration of the payments.
Also read: What is an Assignment of Mortgage and How is it Processed?
The total term for payments also remains the same providing ease to the borrowers.
However, one thing may change upon the assignment of mortgage, which in most cases is optional. The new company which is holding the mortgage may change the way it accepts payments. Alternatively, it may simply accept payments through more methods. In either case, the borrower can request to make the payments in the manner that is most convenient for them, and if the new mortgage lender finds it suitable too, they can change the mode of payment to that.
In short, there are no negative impacts of assignments of mortgage upon the borrower.
Conclusion
Assignments of mortgage is a common process which a lot of mortgage lenders opt for. This helps them quickly regain their liquidity which helps them onboard more clients and benefit from origination fees and other associated charges. These assignments are extended to private investors or government authorities who then become the main lender to whom the borrower must make their remaining repayments.
