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
California allows mortgages to be foreclosed two different ways; judicially or non-judicially. Most people are familiar with the judicial foreclosure process in which a court issues a foreclosure order allowing a foreclosing lender to repossess a home. Non-judicial foreclosures in California occur without the courts and allow a foreclosure through use of what's called the "deed of trust," which serves as the mortgage. California non-judicial foreclosures also require the trustees assigned deeds of trust to actually carry out such foreclosures.
Deeds of Trust
Though "mortgage" is the common name for California home loans, they're actually "deed of trust loans." Rather than use mortgages to make home loans, Golden State lenders employ two instruments: deeds of trust and promissory notes. The deed of trust is what secures your California home loan. Also, your California home loan has three parties: you as the borrower or trustor, your lender or beneficiary and the trustee assigned your loan's deed of trust by your lender.
Most California home loans are foreclosed non-judicially using those loans' deeds of trust combined with their power-of-sale clauses. Power-of-sale clauses are essentially mortgage borrowers' pre-authorizations to non-judicially foreclose their deeds of trust loans should they default. In California non-judicial foreclosures, the first step is always a lender's Notice of Default, or "NOD," to its borrower. Once a California mortgage lender issues you an NOD, it may eventually instruct the trustee assigned your deed of trust to foreclose your loan.
Recordation Of Assignment
California foreclosure defenses include arguing that deed of trust assignments must be legally recorded when they're assigned to trustees. If a California home loan trustee hasn't been properly assigned the deed of trust, it actually can't foreclose that deed of trust, this foreclosure defense argument goes. Recording a deed of trust assignment is called "recordation of assignment." Unfortunately for California homeowners facing non-judicial foreclosure, California courts say that recordation of assignment isn't necessary to foreclose deeds of trust.
It can be tough to fight off a non-judicial foreclosure because you'll have to convince the courts to accept your foreclosure defense arguments. You have other ways to delay or avoid non-judicial foreclosure, though, including mortgage reinstatement and even bankruptcy. In mortgage reinstatement you catch-up all delinquent mortgage payments, plus lender costs, and the lender reinstates your mortgage. Bankruptcy's automatic stay can temporarily delay any foreclosure actions and Chapter 13 bankruptcy may even let you keep your home.
Seek an experienced real estate attorney if you're going to take your non-judicial foreclosure defense to the courts. Eligible California homeowners seeking mortgage reinstatement assistance may be able to use Keep Your Home California's mortgage reinstatement assistance program. Eligible Golden State homeowners can qualify for up to $25,000 in mortgage reinstate assistance funds through Keep Your Home California's programs. Bankruptcy can also be a complicated process and an attorney can give you the best assistance when filing for it.
About the Author
Tony Guerra served more than 20 years in the U.S. Navy. He also spent seven years as an airline operations manager. Guerra is a former realtor, real-estate salesperson, associate broker and real-estate education instructor. He holds a master's degree in management and a bachelor's degree in interdisciplinary studies.
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