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Mortgage Assignment Laws and Definition

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  What is a Mortgage Assignment?

A mortgage is a legal agreement. Under this agreement, a bank or other lending institution provides a loan to an individual seeking to finance a home purchase. The lender is referred to as a creditor. The person who finances the home owes money to the bank, and is referred to as the debtor.

To make money, the bank charges interest on the loan. To ensure the debtor pays the loan, the bank takes a security interest in what the loan is financing — the home itself. If the buyer fails to pay the loan, the bank can take the property through a foreclosure proceeding.

There are two main documents involved in a mortgage agreement. The document setting the financial terms and conditions of repayment is known as the mortgage note. The bank is the owner of the note. The note is secured by the mortgage. This means if the debtor does not make payment on the note, the bank may foreclose on the home. 

The document describing the mortgaged property is called the mortgage agreement. In the mortgage agreement, the debtor agrees to make payments under the note, and agrees that if payment is not made, the bank may institute foreclosure proceedings and take the home as collateral .

An assignment of a mortgage refers to an assignment of the note and assignment of the mortgage agreement. Both the note and the mortgage can be assigned. To assign the note and mortgage is to transfer ownership of the note and mortgage. Once the note is assigned, the person to whom it is assigned, the assignee, can collect payment under the note. 

Assignment of the mortgage agreement occurs when the mortgagee (the bank or lender) transfers its rights under the agreement to another party. That party is referred to as the assignee, and receives the right to enforce the agreement’s terms against the assignor, or debtor (also called the “mortgagor”). 

What are the Requirements for Executing a Mortgage Assignment?

What are some of the benefits and drawbacks of mortgage assignments, are there any defenses to mortgage assignments, do i need to hire an attorney for help with a mortgage assignment.

For a mortgage to be validly assigned, the assignment document (the document formally assigning ownership from one person to another) must contain:

• The current assignor name.
• The name of the assignee.
• The current borrower or borrowers’ names. 
• A description of the mortgage, including date of execution of the mortgage agreement, the amount of the loan that remains, and a reference to where the mortgage was initially recorded. A mortgage is recorded in the office of a county clerk, in an index, typically bearing a volume or page number. The reference to where the mortgage was recorded should include the date of recording, volume, page number, and county of recording.
• A description of the property. The description must be a legal description that unambiguously and completely describes the boundaries of the property.

There are several types of assignments of mortgage. These include a corrective assignment of mortgage, a corporate assignment of mortgage, and a mers assignment of mortgage. A corrective assignment corrects or amends a defect or mistake in the original assignment. A corporate assignment is an assignment of the mortgage from one corporation to another. 

A mers assignment involves the Mortgage Electronic Registration System (MERS). Mortgages often designate MERS as a nominee (agent for) the lender. When the lender assigns a mortgage to MERS, MERS does not actually receive ownership of the note or mortgage agreement. Instead, MERS tracks the mortgage as the mortgage is assigned from bank to bank. 

An advantage of a mortgage assignment is that the assignment permits buyers interested in purchasing a home, to do so without having to obtain a loan from a financial institution. The buyer, through an assignment from the current homeowner, assumes the rights and responsibilities under the mortgage. 

A disadvantage of a mortgage assignment is the consequences of failing to record it. Under most state laws, an entity seeking to institute foreclosure proceedings must record the assignment before it can do so. If a mortgage is not recorded, the judge will dismiss the foreclosure proceeding. 

Failure to observe mortgage assignment procedure can be used as a defense by a homeowner in a foreclosure proceeding. Before a bank can institute a foreclosure proceeding, the bank must record the assignment of the note. The bank must also be in actual possession of the note. 

If the bank fails to “produce the note,” that is, cannot demonstrate that the note was assigned to it, the bank cannot demonstrate it owns the note. Therefore, it lacks legal standing to commence a foreclosure proceeding.

If you need help with preparing an assignment of mortgage, you should contact a mortgage lawyer . An experienced mortgage lawyer near you can assist you with preparing and recording the document.

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Daniel Lebovic

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Original Author

Prior to joining LegalMatch, Daniel worked as a legal editor for a large HR Compliance firm, focusing on employer compliance in numerous areas of the law including workplace safety law, health care law, wage and hour law, and cybersecurity. Prior to that, Daniel served as a litigator for several small law firms, handling a diverse caseload that included cases in Real Estate Law (property ownership rights, residential landlord/tenant disputes, foreclosures), Employment Law (minimum wage and overtime claims, discrimination, workers’ compensation, labor-management relations), Construction Law, and Commercial Law (consumer protection law and contracts). Daniel holds a J.D. from the Emory University School of Law and a B.S. in Biological Sciences from Cornell University. He is admitted to practice law in the State of New York and before the State Bar of Georgia. Daniel is also admitted to practice before the United States Courts of Appeals for both the 2nd and 11th Circuits. You can learn more about Daniel by checking out his Linkedin profile and his personal page. Read More

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The Five Major Assignment Errors And How To Avoid Them

In theory, an assignment seems like a benign and foolproof item. In reality, however, an assignment can be the launching point for a surplus of problems. Indeed, assignments that are handled in the Keynesian notion of being merely ‘roughly right’ can bring endless anxiety into a servicer's life.

For servicers that prefer existing in a stress-free working environment, there are five key assignment-related errors that need to be avoided at all costs.

Identity crises

On the surface, the basic principle of an assignment does not seem very confusing.

‘An assignment is simply a document that evidences the transfer of a loan from one party to another,’ says Alice P. Sorensen, chief operating officer at Orange, Calif.-based LRES Corp. ‘Think of it as a birth certificate that travels with the loan for the rest of its life.’

However, Sorensen notes that the first major mistake can occur at the very beginning of the process if the assignment has erroneous data.

‘Clerically incorrect information will create grand grief for some future servicers,’ she says.

Equally problematic is the absence of crucial data.

‘There is a problem if the servicer leaves blank the name of assignees,’ says Myron Finley, chief legal officer and general counsel of Nationwide Title Clearing, based in Safety Harbor, Fla. ‘There are problems filling in blanks after the document is already signed and notarized. That opens doors to allegations of mortgage fraud.’

Finley adds that it is vital to know the lender of record associated with the assignment. ‘If you don't know who the lender of record is, it undercuts everything you do at the assignment,’ he says.

Cindy Gainsforth, executive vice president at Pasadena, Calif.-based Rekon Technologies, states that a missing chain of assignment is also a major error.

‘This happens because either the servicer did not record the assignment, or it was left in a file with the belief that whoever buys it would assign it,’ she says.

On the cheap

Over the past few years, the costs of mortgage servicing have climbed dramatically. Not surprisingly, many servicing operations are eager to keep their expenses low. And this is where the second key problem in assignments occurs.

‘The biggest mistake, in my opinion, is not recording the assignment when a trade takes place as a means of reducing your transfer costs,’ says Sorensen. ‘It is foolish to think that you do not need to record an assignment until you do your next trade. In fact, the failure to record will expose you to tremendous title issues.’

Mike Wileman, president and CEO of Orion Financial Group, based in Southlake, Texas, believes that some servicers mistakenly assume they will save money by not outsourcing this process.

‘Too many people try to do assignments in-house,’ he observes. ‘But if they are not prepared to do them properly, it costs two to three times the work. People try to save a few pennies, but it creates more problems down the road.’

Local tastes

Even if the in-house assignment process is free of mistakes, there are still plenty of problems when it comes to dealing with the county registrars.

‘Many of the counties are antiquated in the technology they use,’ says Sorensen. ‘They cannot keep up with the volume of trades that take place.’

Gainsforth warns that servicers need to realize that there is no uniform standard in assignment registrations.

‘Some servicers think they can just create a template,’ she says. ‘But there are more than 3,600 recording districts in the U.S., and they have different recording requirements. Some districts are very particular at how assignments are created.’

Scott Goldstein, president and CEO of Farmington Hills, Mich.-based National Default Exchange LP, concurs.

‘Some counties want their own font size and margin size,’ he says. ‘Some want to have a name printed under the signature, and some don't want a name printed under the signature.’

There are also distinctive assignment requirements at a state level.

‘In Mississippi, there is a new requirement that a borrower's name and phone number appear on every document,’ says Finley. ‘Some people feel that goes too far and can lead to invasion of privacy concerns. So, in Mississippi, you can leave the phone number off for an extra $10 fee. But various counties in the state interpret that requirement differently.’

Finley adds that South Carolina has its own unique requirements regarding who witnesses the assignment.

‘In South Carolina, a notary has to have his or her signature witnessed as well,’ he says. ‘If you are not aware of that, your assignment gets rejected.’

Le mystere du MERS

Another key assignment problem involves the Mortgage Electronic Registration Systems (MERS).

‘One of the biggest issues today in assignments is the large quantity of assignments servicers have to prepare in the event of default,’ says Gainsforth. ‘Due to MERS' ruling that legal action cannot be filed in MERS' name, plus the increased rate of default in the past few years, servicers experienced a spike in volume that they did not anticipate and did not have the experienced staff to manage.

‘As a result,’ she continues, ‘backlogs in assignments were created, delaying the foreclosure process. This resulted in monetary loss in the form of fines from MERS and/or investors. MERS imposes a $10,000 fine for each legal action filed in MERS' name, while investors impose daily curtailments when foreclosures are delayed.’

‘MERS is still not well understood, even in the industry,’ says Finley. ‘There is also the question of the MERS identification number – sometimes it is not on the assignment when it gets recorded, or the wrong number is attached to a loan. Borrowers might not find their loan in MERS, which leads to a lot of upset borrowers. Or an assignment out of MERS sometimes happens without being deactivated within MERS. The homeowners see a release filed in the public record, but they see it is still in MERS and wonder whether or not it is still in MERS.’

Customer disservice

Needless to say, aggravating the borrower is also a major no-no – especially in today's servicing environment.

‘If the borrower pays off a loan but the servicer is not be able to release a lien in a timely manner, that is poor customer service,’ says Wileman. ‘Not to mention, that it could lead to litigation.’

Sorensen urges servicers to be aware of potential fraud schemes that could snag borrowers.

‘There is a scam in which an unscrupulous person sends out a notice to the borrower that the loan was sold when, in fact, it hasn't been traded,’ she says. ‘The borrower makes payments to a new place, but the loan will go into default with the real lender. Meanwhile, the scammers take one or two payments from unsuspecting borrowers. It is critical for servicers to stay on top of collections so problems like this do not turn into other issues.’

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• The Legally Invalid Assignment Defense to Foreclosure

People who are facing the possibility of a foreclosure on their home may want to investigate the history of their mortgage. If the assignment to the foreclosing party is not valid, this may be a viable defense to a foreclosure. In some states, you can demand that the foreclosing party produce a written assignment of the mortgage. If it does not have an assignment or failed to record it as required by state law, this may result in the dismissal of the foreclosure action. Recording rules may require that the foreclosing party record the assignment before starting the foreclosure.

Courts in other states are more lenient in their review of assignments. Since the mortgage is closely associated with the promissory note, the foreclosing party may be allowed to enforce the promissory note even if it cannot produce a valid assignment of the mortgage. You should seek legal guidance in your state to determine whether this defense may be viable.

Homeowners who believe that they may have a defense based on an invalid assignment may wish to consult with a knowledgeable foreclosure lawyer, since this defense can become complicated. Justia offers a lawyer directory to simplify researching, comparing, and contacting attorneys who fit your legal needs.

The Relationship Between Mortgages and Promissory Notes

The mortgage and the promissory note are the two key documents attached to a loan for buying a home. Some purchases involve a deed of trust rather than a mortgage, but they are functionally equivalent in this context. While the promissory note is your guarantee to repay the loan, the mortgage gives the lender the right to foreclose if you do not repay the loan as arranged. The mortgage also identifies the property that will serve as security for the loan. Thus, the two documents work together in establishing the lender’s rights.

The Role of Mortgage Assignments in Loan Transfers

A bank or other lender often will sell a mortgage to another party, which will collect payments and pursue the homeowner if they fail to keep up with the mortgage. To transfer the loan, the original lender will endorse the promissory note to the new owner of the mortgage. This is because collection efforts hinge on owning the promissory note. If the foreclosing party cannot produce the promissory note, the homeowner will have a defense to the foreclosure.

Meanwhile, the new owner will record the assignment of the mortgage. This includes transferring the right to foreclose, as provided by the mortgage, to the new owner. The assignment will provide the amount of the mortgage and the names of the homeowner, the original lender, and the new owner of the mortgage. It also will contain a description of the property attached to the mortgage and the date when the mortgage took effect.

An invalid assignment defense may only be a temporary solution until the new owner records an assignment in their name.

The mortgage industry uses a tool known as the Mortgage Electronic Registration System (MERS) to keep track of assignments. MERS may be a nominee for the lender, or it may receive the mortgage as an assignment. If MERS is the current assignee, it cannot pursue a foreclosure because it does not have an interest in the promissory note. MERS simply serves as an agent for the current owner of the mortgage and assists in creating a record for transfers of the mortgage. This allows banks to more easily transfer loans among them without creating a new assignment each time. You may have a defense against a foreclosure action if MERS is listed as the owner of the mortgage. However, this likely will be only a temporary solution until the new owner records an assignment in their name.

Last reviewed October 2023

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32 CFR § 150.15 - Assignments of error and briefs.

(a) General provisions. Appellate counsel for the accused may file an assignment of error if any are to be alleged, setting forth separately each error asserted. The assignment of errors should be included in a brief for the accused in the format set forth in Appendix B to this part. An original of all assignments of error and briefs, and as many additional copies as shall be prescribed by the Court, shall be submitted. Briefs and assignments of errors shall be typed or printed, double-spaced on white paper, and securely fastened at the top. All references to matters contained in the record shall show record page numbers and any exhibit designations. A brief on behalf of the government shall be of like character as that prescribed for the accused.

(b) Time for filing and number of briefs. Any brief for an accused shall be filed within 60 days after appellate counsel has been notified of the receipt of the record in the Office of the Judge Advocate General. If the Judge Advocate General has directed appellate government counsel to represent the United States, such counsel shall file an answer on behalf of the government within 30 days after any brief and assignment of errors has been filed on behalf of an accused. Appellate counsel for an accused may file a reply brief no later than 7 days after the filing of a response brief on behalf of the government. If no brief is filed on behalf of an accused, a brief on behalf of the government may be filed within 30 days after expiration of the time allowed for the filing of a brief on behalf of the accused.

(c) Appendix. The brief of either party may include an appendix. If an unpublished opinion is cited in the brief, a copy shall be attached in an appendix. The appendix may also include extracts of statutes, rules, or regulations. A motion must be filed under § 150.23 , infra, to attach any other matter.

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Understanding the Assignment of Mortgages: What You Need To Know

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A mortgage is a legally binding agreement between a home buyer and a lender that dictates a borrower's ability to pay off a loan. Every mortgage has an interest rate, a term length, and specific fees attached to it.

Written by Attorney Todd Carney .  Updated November 26, 2021

If you’re like most people who want to purchase a home, you’ll start by going to a bank or other lender to get a mortgage loan. Though you can choose your lender, after the mortgage loan is processed, your mortgage may be transferred to a different mortgage servicer . A transfer is also called an assignment of the mortgage. 

No matter what it’s called, this change of hands may also change who you’re supposed to make your house payments to and how the foreclosure process works if you default on your loan. That’s why if you’re a homeowner, it’s important to know how this process works. This article will provide an in-depth look at what an assignment of a mortgage entails and what impact it can have on homeownership.

Assignment of Mortgage – The Basics

When your original lender transfers your mortgage account and their interests in it to a new lender, that’s called an assignment of mortgage. To do this, your lender must use an assignment of mortgage document. This document ensures the loan is legally transferred to the new owner. It’s common for mortgage lenders to sell the mortgages to other lenders. Most lenders assign the mortgages they originate to other lenders or mortgage buyers.

Home Loan Documents

When you get a loan for a home or real estate, there will usually be two mortgage documents. The first is a mortgage or, less commonly, a deed of trust . The other is a promissory note. The mortgage or deed of trust will state that the mortgaged property provides the security interest for the loan. This basically means that your home is serving as collateral for the loan. It also gives the loan servicer the right to foreclose if you don’t make your monthly payments. The promissory note provides proof of the debt and your promise to pay it.

When a lender assigns your mortgage, your interests as the mortgagor are given to another mortgagee or servicer. Mortgages and deeds of trust are usually recorded in the county recorder’s office. This office also keeps a record of any transfers. When a mortgage is transferred so is the promissory note. The note will be endorsed or signed over to the loan’s new owner. In some situations, a note will be endorsed in blank, which turns it into a bearer instrument. This means whoever holds the note is the presumed owner.

Using MERS To Track Transfers

Banks have collectively established the Mortgage Electronic Registration System , Inc. (MERS), which keeps track of who owns which loans. With MERS, lenders are no longer required to do a separate assignment every time a loan is transferred. That’s because MERS keeps track of the transfers. It’s crucial for MERS to maintain a record of assignments and endorsements because these land records can tell who actually owns the debt and has a legal right to start the foreclosure process.

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Assignment of Mortgage Requirements and Effects

The assignment of mortgage needs to include the following:

The original information regarding the mortgage. Alternatively, it can include the county recorder office’s identification numbers. 

The borrower’s name.

The mortgage loan’s original amount.

The date of the mortgage and when it was recorded.

Usually, there will also need to be a legal description of the real property the mortgage secures, but this is determined by state law and differs by state.

Notice Requirements

The original lender doesn’t need to provide notice to or get permission from the homeowner prior to assigning the mortgage. But the new lender (sometimes called the assignee) has to send the homeowner some form of notice of the loan assignment. The document will typically provide a disclaimer about who the new lender is, the lender’s contact information, and information about how to make your mortgage payment. You should make sure you have this information so you can avoid foreclosure.

Mortgage Terms

When an assignment occurs your loan is transferred, but the initial terms of your mortgage will stay the same. This means you’ll have the same interest rate, overall loan amount, monthly payment, and payment due date. If there are changes or adjustments to the escrow account, the new lender must do them under the terms of the original escrow agreement. The new lender can make some changes if you request them and the lender approves. For example, you may request your new lender to provide more payment methods.

Taxes and Insurance

If you have an escrow account and your mortgage is transferred, you may be worried about making sure your property taxes and homeowners insurance get paid. Though you can always verify the information, the original loan servicer is responsible for giving your local tax authority the new loan servicer’s address for tax billing purposes. The original lender is required to do this after the assignment is recorded. The servicer will also reach out to your property insurance company for this reason.  

If you’ve received notice that your mortgage loan has been assigned, it’s a good idea to reach out to your loan servicer and verify this information. Verifying that all your mortgage information is correct, that you know who to contact if you have questions about your mortgage, and that you know how to make payments to the new servicer will help you avoid being scammed or making payments incorrectly.

Let's Summarize…

In a mortgage assignment, your original lender or servicer transfers your mortgage account to another loan servicer. When this occurs, the original mortgagee or lender’s interests go to the next lender. Even if your mortgage gets transferred or assigned, your mortgage’s terms should remain the same. Your interest rate, loan amount, monthly payment, and payment schedule shouldn’t change. 

Your original lender isn’t required to notify you or get your permission prior to assigning your mortgage. But you should receive correspondence from the new lender after the assignment. It’s important to verify any change in assignment with your original loan servicer before you make your next mortgage payment, so you don’t fall victim to a scam.

Attorney Todd Carney

Attorney Todd Carney is a writer and graduate of Harvard Law School. While in law school, Todd worked in a clinic that helped pro-bono clients file for bankruptcy. Todd also studied several aspects of how the law impacts consumers. Todd has written over 40 articles for sites such... read more about Attorney Todd Carney

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Borrower Has Standing to Challenge Void Assignment

Posted by NCBRC - February 24, 2016

The Supreme Court of California held that a borrower on a home loan secured by a deed of trust has standing to base an action for wrongful foreclosure on allegations that defects in the purported assignment of the note and deed of trust renders the assignment void. Yvanova v. New Century Mortgage Corp., No. S218973 (Cal. Feb. 18, 2016).

In 2006, Ms. Yvanova executed a deed of trust in favor of New Century. In 2007, New Century was dissolved in a bankruptcy liquidation. In 2011, New Century assigned Ms. Yvanova’s deed of trust to Deutsche Bank as trustee to Morgan Stanley investment trust. The Morgan Stanley investment trust, however, had a closing date of January 27, 2007 by which all assignments had to be transferred. Western Progressive, the substitute trustee for Deutsche Bank, gave notice of trustee’s sale of the property on August 20, 2012. The property was sold at public auction on September 14, 2012.

Ms. Yvanova filed suit in state court for quiet title alleging that the assignment to Morgan Stanley was void because 1) New Century’s assets had previously been transferred to the bankruptcy trustee, and 2) the Morgan Stanley trust had closed prior to the assignment. The court granted the defendants’ demurrer finding that Ms. Yvanova lacked standing to challenge the foreclosure on the basis of invalid assignment of the mortgage because she was not a party to that assignment. The appellate court affirmed.

Generally, under California law, a deed of trust is a negotiable instrument and borrowers may not object to its assignment. In the event of default, only the current assignee is entitled to enforce the note through nonjudicial foreclosure.

In finding that Ms. Yvanova had standing, the court distinguished between assignments that are void and those that are merely voidable. An assignment that is void is a nullity; it has no legal effect. A contract that is voidable has a defect that would subject it to being rendered void, but it is not considered void unless action is taken. In Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, the borrower, like Ms. Yvanova, challenged a foreclosure on the grounds that the deed of trust had been assigned after the trust had closed. The Glaski court found that the borrower had a legitimate cause of action so long as she could present facts demonstrating that the beneficiary on whose behalf the trustee initiated foreclosure was not the true beneficiary. That court determined that when a deed of trust is assigned to a trust after that trust was closed the assignment is void and the borrower has standing to challenge a foreclosure conducted on behalf of the purported assignee.

The court walked through the cases which Glaski discussed. In Culhane v. Aurora Loan Services of Nebraska, 708 F.3d 282   (1st Cir. 2013), the First Circuit rejected the broad rule that a borrower lacks standing to challenge an assignment that is void ab initio, finding that the borrower suffers the requisite harm by reason of the enforcement of the note by a non-owner. The court noted that under Massachusetts law, a broad rule that a borrower never has standing to challenge a foreclosure based on a void assignment would have the effect of depriving the borrower of any method of challenging a wrongful nonjudicial foreclosure.

In contrast, Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, upon which the appellate court relied, held that a borrower who is in default on the note has no standing to complain about the identity of the party foreclosing because the borrower’s rights and obligations are unaffected. The only party harmed is the true beneficiary.

The Yvanova court disagreed with Jenkins , finding that Glaski was the better reasoned decision. The issue of the borrower’s injury had different significance for purposes of standing than it did for purposes of establishing the elements of wrongful foreclosure. For standing, the harm to the borrower by reason of nonjudicial foreclosure by a nonbeneficiary of the deed of trust was sufficient. Moreover, the court rejected the proposition relied on in Jenkins that because the borrower’s obligations under the note remained the same regardless of who had the right to enforce it, he or she could not complain about the identity of party enforcing it. The Yvanova court reasoned that the mortgage contract contemplates not only that the borrower pay the debt, but that the recipient of the payments be the mortgagee. The contrary argument would prevent a borrower from complaining if a total stranger to the mortgage foreclosed. “A homeowner who has been foreclosed on by one with no right to do so has suffered an injurious invasion of his or her legal rights at the foreclosing entity‘s hands. No more is required for standing to sue.”

Unlike the case of an assignment that is voidable, the borrower’s challenge to the assignment as void ab initio is not an attempt to assert the rights of other parties as those parties have no ability to ratify the assignment. Rather, it is a challenge to the existence of those rights. On the other hand, “when an assignment is merely voidable, the power to ratify or avoid the transaction lies solely with the parties to the assignment; the transaction is not void unless and until one of the parties takes steps to make it so. A borrower who challenges a foreclosure on the ground that an assignment to the foreclosing party bore defects rendering it voidable could thus be said to assert an interest belonging solely to the parties to the assignment rather than to herself.”

It is important to note what this case was not about. The court limited its holding as follows:

“Our ruling in this case is a narrow one. We hold only that a borrower who has suffered a nonjudicial foreclosure does not lack standing to sue for wrongful foreclosure based on an allegedly void assignment merely because he or she was in default on the loan and was not a party to the challenged assignment. We do not hold or suggest that a borrower may attempt to preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing party‘s right to proceed. Nor do we hold or suggest that plaintiff in this case has alleged facts showing the assignment is void or that, to the extent she has, she will be able to prove those facts. Nor, finally, in rejecting defendants‘ arguments on standing do we address any of the substantive elements of the wrongful foreclosure tort or the factual showing necessary to meet those elements.”

Yvanova Cal SCt Opinion

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Servicing: Assignments to HUD, Part I: Reasons, Processes and Purpose

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Whether you are involved in reverse mortgage loan servicing, origination or any aspect in between, no doubt you understand and strongly believe in the benefits a reverse mortgage provides to our borrowers. I’m not sure, however, that the industry as a whole understands or appreciates the important role HUD serves with the HECM product. In this two-part piece, the detailed process and aspects of the HUD assignment process will be explored.

Those on the servicing side understand the importance of HUD insurance through its second mortgage and the twofold purpose it serves:

ONE || This second mortgage insures borrowers in the exceptionally unlikely and rare event a lender goes out of business, and

TWO || HUD provides insurance for servicers in the event a loan is not paid back in full. This remedy is essentially handled like any insurance claim, and like traditional insurance, there are different types of claims.

With traditional insurance (auto, home), the most common claims are made when something negative (accidents, injury) happens. I categorize these types of claims in the HECM insurance world as those that are filed for reasons of default. Examples would be when a loan is called due and payable or the loan has been satisfied in any way other than full payment to the lender. These are HUD Claim Type 21 (Foreclosure/Deed in Lieu) and Claim Type 23 (Mortgagor’s Short Sale) processes. Insurance companies also offer incentives for positive records (that is, spotless driving records with no accidents or injuries). In the HECM insurance world, these would include the Assignment to HUD or HUD Claim Type 22 process.

Let’s walk through the complicated territory servicers navigate when a loan reaches 98 percent of its Maximum Claim Amount (MCA), determined by the current loan balance as a percentage of the MCA. The MCA is determined at closing and is defined by HUD as “the lesser of a home’s appraised value or the maximum loan limit that can be insured by FHA.”

When a loan becomes eligible for assignment to HUD at 98 percent of MCA, it must meet certain criteria for

HUD to accept it, take over the servicing and then pay the claim to the lender. To ensure that a loan is ready for this assignment, this criterion is triple-checked well before the balance reaches 98 percent (typically this happens when it approaches 85 to 90 percent). Loans move (slowly) to MCA through the monthly accumulation of interest, mortgage insurance premiums and servicing fees. During this initial review, the servicer is seeking to confirm that the loan is in “active” status.

HUD will not accept a loan for assignment if it is in default or is due and payable. The review focuses on origination documents and ensures that there are no errors on the mortgage, that assignments (if applicable) are in place, and that the servicer has all of the documents required for submission to HUD. If anything is incorrect or out of place in the servicing file, we work aggressively to correct it. As a subservicer, Celink reaches out to its clients involved in the origination process. Rare cases arise when a client (or its subservicer) is unable to fix a document error, which makes the loan’s assignment to HUD impossible.

There may be other reviews of a loan, especially if work is required to complete or fix errors. In short, a final review process follows and this happens much closer to eligibility, around 96-97 percent of MCA. Loans can take years to move to this assignment process.

A majority of loans are paid off or will have moved to default/due and payable status before reaching HUD assignment eligibility. A loan that is eligible at 95 or 96 percent may not be eligible at 97.5 or 98 percent. Additionally, a loan that has lender/force-placed insurance (FPI) or delinquent property taxes is not eligible for assignment. This is true even when the FPI or delinquent property taxes do not create a default status on the loan.

Part II will focus on eligible loans for assignment to HUD and the process of assignment within HUD’s servicing software, HERMIT.

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The Dilemma Of A Mortgage Satisfaction Filed After An Assignment

DATE PUBLISHED

PRACTICE AREA

This is still too commonplace a problem, as mortgage lenders and servicers have learned to their chagrin and it arises most often out of New York State’s procedure for a consolidation, extension and modification agreement (“CEMA”).  Helpfully, a new case reminds that the erroneous satisfaction really is no good and is subject to being expunged.  [ Bank of New York Mellon Trust Company, N.A. v. Claypoole , 150 A.D.3d 505, 55 N.Y.S.3d 19 (1 st Dept. 2017)].

The scenario most often occurs in this fashion (although there could be other fact patterns as well).   A borrower wishes to refinance its mortgage and for a larger sum.  Because there is a significant mortgage tax in New York, should the existing mortgage be assigned, so that only the new money is subject to the mortgage tax, it is a more economical and amenable transaction.  This would accordingly elicit an assignment of the existing mortgage which is then consolidated with the new mortgage arriving neatly at the full sum of the new obligation.  What happens too often though, as noted, is that the assigning lender later executes and records a satisfaction of the mortgage which it assigned.  This probably results from administrative procedures not quite aligned with the CEMA concept whereby a mortgage which has been paid (the assignor has been paid for the mortgage) looks like it needs to be satisfied.

This is likely to go unnoticed until someday when there is a default under the new mortgage as consolidated and the foreclosure search reveals that the mortgage which has been assigned (and now forms a portion of the CEMA) has been satisfied.  This then requires a quiet title action to cancel the erroneous satisfaction.

While the mechanics of this pursuit are not so effortless, the helpful law on the subject is clear, again stated anew by the recent case cited.  The controlling principle is that a satisfaction of mortgage is void from the outset when the party that executed it had already assigned away its interest under that mortgage.  This is logical, but comforting nevertheless to see it enunciated by an appeals court.  Not incidentally, the statute of limitations which might otherwise intercede (especially if the error is not discovered for many years) in actuality has no application because the offending satisfaction was void at the outset.  This was a point made as well by the cited decision with supporting authority for that.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures , LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.

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What should I do if I find an error in one of my mortgage closing documents?

If you find an error in one of your mortgage closing documents, contact your lender or settlement agent to have the error corrected immediately.

Common errors in your documents can be as simple as a name misspelled or a wrong number in an address, or as serious as incorrect loan amounts or missing pages. All of these errors can cause delays in closing of a few hours or even a few days, because everything has to be in order before closing.

Here are some steps you can take to make sure there are no errors in your closing documents:

• Ask to see every document in advance.
• Pay particular attention to loan documents.
• Double-check your loan and down payment amounts, interest rates, spellings, and all your personal information.
• Question anything you don’t understand or that seems odd. 
• Talk to your closing agent well ahead of your scheduled closing – at least a few days. Ask if everyone involved has everything they need. Be sure you understand who is in charge of the closing and the documents.

You can also use the CFPB’s interactive guide to the Closing Disclosure form and guide to other key closing documents .

Before you go to your closing, you might want to call and ask if the file for your transaction is complete, and if all the documents are ready to sign.

Note: You won’t receive a Loan Estimate or Closing Disclosure if you applied for a mortgage prior to October 3, 2015, or if you're applying for a  reverse mortgage .   For those loans, you will receive two forms – a Good Faith Estimate (GFE) and an initial Truth-in-Lending disclosure – instead of a Loan Estimate. Instead of a Closing Disclosure, you will receive a final Truth in Lending disclosure and a HUD -1 Settlement Statement . If you are applying for a HELOC , a manufactured housing loan that is not secured by real estate, or a loan through certain types of homebuyer assistance programs, you will not receive a GFE or a Loan Estimate, but you should receive a Truth-in-Lending disclosure .

If you have a problem with your mortgage closing process, you should discuss the problem with your lender.  You can also submit a complaint to the CFPB online or by calling (855) 411-CFPB (2372). We’ll forward your complaint to the lender and work to get you a response, generally in 15 days.

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Assignment Of Loan

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What is an assignment of loan.

Under an assignment of loan, a lender (the assignor) assigns its rights relating to a loan agreement to a new lender (the assignee). Only the assignor's rights under the loan agreement are assigned. The assignor will still have to perform any obligations it has under the facility agreement.

The debtor, the recipient of the loan, must be notified when a debt is assigned. When there is an assignment of a loan, a Notice of Assignment (NOA) is sent out to the debtor informing them that a new party is now responsible for collecting any outstanding amount.

Assignment Of Loan Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.14 5 dex1014.htm ASSIGNMENT OF LOAN DOCUMENTS , Viewed October 21, 2021, View Source on SEC .

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I was born and raised in Wayne, New Jersey and attended Seton Hall University, graduating cum laude. I followed my family down to Florida to attend Ave Maria School of Law where I graduated cum laude. I was admitted to the Florida Bar in 2018. During law school, I participated in the Certified Legal Internship program with the State Attorney's Office of the 20th Judicial Circuit and litigated 5 jury trials, 1 non jury trial and argued various motions before the court under the supervision of an Assistant State Attorney. I was an Assistant States Attorney for Collier County from 2018 to 2020 before moving into private practice in the areas of real estate and first party property from 2020 to 2021. As of November 2021, I started my own law practice that focuses on business planning, real estate and estate planning.

Vicki graduated from Regent University School of Law in Virginia Beach, Virginia in 1996. She is a licensed attorney. She has been admitted to Wisconsin since 1998 and Pennsylvania since 1999.

I work with private tech companies on entity formation, corporate governance, and commercial agreements. I was an in-house counsel for a unicorn fintech startup and am currently associated with a startup boutique while operating my solo practice. I received my JD from Berkeley Law, and served in the US Navy for 5 years as a combat linguist. I am fluent in Korean.

Whitney L. Smith's journey from entrepreneur to advocate is fueled by a profound understanding of the business world. With a decade of firsthand entrepreneurial experience, she entered law school driven by a mission to protect others' businesses. However, her passion for real estate law blossomed as she recognized the tremendous benefits rental property ownership offers to individuals seeking passive income and community development. Blending her deep understanding of transactional law with zealous courtroom advocacy, she empowers landlords to thrive. Born and raised in St. Petersburg, Florida, she is a proud graduate of Stetson College of Law and cherishes her role as a devoted parent to two children and a beloved pit bull companion.

Business, Real Estate, Tax, Estate Planning and Probate attorney with over 20 years experience in private practice in Colorado. Currently owner/operator of John M. Vaughan, Attorney at Law solo practitioner located in Boulder, CO. My practice focuses on transactional matters only.

I have 20-plus years of experience as a corporate general counsel, for public and private corporations, domestic and international. I have acted as corporate secretary for a publicly-held corporation and have substantial experience in corporate finance, M&A, corporate governance, incorporations, corporate maintenance, complex transactions, corporate termination and restructuring, as well as numerous aspects of regulatory and financial due diligence. In my various corporate roles, I have routinely drafted complex corporate contracts and deal-related documents such as stock purchase agreements, option and warrant agreements, MSAs, SOWs, term sheets, joint venture agreements, tender agreements purchase and sale agreements, technology licensing agreements, vendor agreements, service agreements, IP and technology security agreements, NDAs, etc. and have managed from both a legal and business perspective many projects in the financial, technology, energy and venture capital fields.

My practice focuses on business and commercial litigation. I have worked with companies of all sizes from sole member LLCs to those in the Fortune 500. I've advised clients on mergers, equity issuances, commercial transactions, joint ventures, employment issues, and non-competition. I've also drafted and negotiated the underlying agreements for these transactions and more.

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Can Mortgage Record Errors Be Fixed?

Posted by CourthouseDirect.com Team - 20 January, 2016

Ideally, lenders will double and triple check everything before filing a formal mortgage record. Unfortunately, mistakes do happen, and an error on your mortgage record can hinder property transfer, bankruptcy proceedings, and the refinancing process.

Most Common Mistakes

Anytime someone inputs new information into a system, a mistake can happen. The property owner may improperly fill out the paperwork or misspell a name. A lender may fail to notice a mistake or make one him or herself. The records office responsible for filing away deed and mortgage information is often responsible for minor mistakes that cause problems later.

The most common record-related mistakes include poor timing of document submission, poorly executed documents, and erroneously indexed documents. Something as simple as improper notarization could cause problems. At worst, an error could render the entire mortgage void in court, leaving a property legally open to another purchaser.

Correcting a Mortgage Record Error

If your mortgage record is filed, you cannot “unfile” it, correct it, and then resubmit it. However, you can amend the record with a corrective or newly executed deed or mortgage.

This type of record filing allows property owners to reaffirm information in the preexisting document while correcting any mistakes that were previously made. Depending on the state, property owners may need to go through a slightly different process to create and resubmit a formalized document.

In some states, the courts will allow property owners to file an affidavit of correction or scrivener’s affidavit for clerical and other minor errors. This type of amendment differs significantly from a full corrective filing, and some property owners may find the process of filing an affidavit simpler than encouraging a lender and an attorney to re-open and correct the original deed.

However, an affidavit may not have the same legal protections as a newly executed corrective document. For instance, in some states, the courts have determined information included in an affidavit, such as a particular parcel of land, may not be secured under the original mortgage. When filing for bankruptcy, this type of error can hurt both a lending organization and a property owner.

Every jurisdiction is different. Your local property records office or a property records database may help you understand the rules and requirements in your area. Always have an experienced attorney create or review your submission, and take every step possible to secure the legality of the change in the formal record. For example, always include both grantor and grantee signatures on corrective submissions to ensure the validity of the filing.

Timing Is Important

Whenever you initially file a mortgage record or corrective document, make sure you meet all the appropriate deadlines for document submission. Failing to file every required document may result in its exclusion from the formal record.

Simply mailing the documents to the court before the due date may not be enough to prevent errors in indexing or 3 rd party fraudulent filings. In some jurisdictions, an opened set of documents that was hand delivered may take precedence over an unopened mailing. Consider taking your documents to the courthouse personally to eliminate the likelihood of this type of error.

Technology Improves the Rate of Record Errors

The antiquated filing system used in most jurisdictions creates room for errors that can be difficult to address. Many states have started to implement technological solutions to cut down on the number of errors in mortgage and deed filings. For instance, in New York, property owners in some jurisdictions are given a notification any time the state receives a document associated with the property title or mortgage. Any property owner who takes action after receiving a notice may avoid the process of filing a corrective document.

Ultimately, as more record offices start using databases, lenders, property owners, and legal counsel will have the ability to change information before it becomes part of a permanent record. In addition to reducing the number of simple errors, this type of automation may also reduce abuses such as fraudulent filings. 

Avoiding Records Errors in Mortgages

A mortgage error may not effect a property owner’s mortgage payments or property usage in the near future, but one simple mistake can cause problems if a property owner files for bankruptcy or sells the property at a future date. Carefully examine the documents for mistakes prior to filing.

Trust your attorney, but double check the actual information in your mortgage and on file with your lender before anything is submitted to the records office. If possible, hand-deliver the mortgage record to the records office, and take advantage of your county or state’s technological record keeping tools. Always keep a clear record of dates and copies of your submission for future reference.

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Scammers follow the news about student loan forgiveness

Hearing a lot about federal student loan forgiveness in the news? You’re not alone — scammers are, too. You might get a call from someone saying they’re affiliated with Federal Student Aid (FSA) or the Department of Education. (They’re not.) They’ll say they’re following up on your eligibility for a new loan forgiveness program, and might even know things about your loan, like the balance or your account number. They’ll try to rush you into acting by saying the program is available for a limited time. But this is all a scam. What else do you need to know to spot scams like this?

The only place to get help managing your federal student loans is  StudentAid.gov . FSA (and your federal loan servicer) won’t ever pressure you to sign up for anything — but a scammer will. And sometimes, it’s easier to tell what’s real by learning to spot what’s not. To get you started:

• Don’t rely on government seals or logos.  Scammers use official-looking names, seals, and logos to make them seem more legit.
• Don’t buy promises of special access. There’s no special access to repayment plans or loan forgiveness programs. No one can get you into loan forgiveness programs you don’t qualify for or wipe out your loans. Use your FSA account dashboard to see which programs you might be eligible for.
• Never pay an upfront fee. It’s illegal for companies to charge you before they help you reduce or get rid of your student loan debt.   And if you have to pay upfront, you might not get any help — or your money back. Get free help managing your federal loans at StudentAid.gov/repay . If your loans are private, go straight to your loan servicer for help.
• Never share your FSA ID login information. Only scammers say they need it to help you. If a scammer gets your FSA ID, they could cut you off from your loan servicer — or even steal your identity.

Check out FSA’s resources for avoiding student loan scams . And if you spot a student loan scam, tell the FTC at: ReportFraud.ftc.gov .

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studentaid.gov actually helps the scammers with this, since it's easy for them to verify if your email address is registered with studentaid.gov. The site should state that it's going to send a password reset IF the email is on file but provide no indication if the email is registered or not. This makes it harder for the scammer to determine the legitimacy of the email.

The email sends a PIN to unlock and access the account. Scammers will ask for the PIN (they start a password lost action), and if that's provided, gives them access to the studentaid.gov account. They tell you it's for verification that you are you, and don't tell you that they are going to log into your account as you.

Sending a PIN to the account probably isn't a good idea, since if you give that PIN to a scammer, they can get into your account. A password reset link would be better, since you would have to have access to the email, and that's not something you could give to a scammer.

Simple changes could help reduce the impact of this scam.

The FSA ID has be renamed the "studentaid (dot) gov account" by the Department of Education, though most people are still calling it the FSA ID.

This is very instructive and helpful. Thanks