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
A mortgage lender can transfer a mortgage to another company using an assignment agreement. This document, called an assignment of mortgage, transfers the mortgage account and all of the interest the original lender had under the loan to a new lender. Many banks and mortgage lenders sell outstanding loans in order to free up money to lend to new borrowers, and use an assignment of mortgage to legally grant the loan obligation to the new mortgage holder.
An assignment of mortgage must contain several items of information. The original mortgage recording information, or document identification numbers the loan papers received from the county recorder's office, is listed. The names of the borrower, date the mortgage was dated and filed and the amount the mortgage was for when taken out are also shown. Most assignments will also give the legal description, or paragraph used to describe the property on legal documents, of the real estate secured by the mortgage.
Notice to Borrower
The original mortgage lender does not have to send notice before assigning a mortgage, and the permission of the borrower is not required. The new mortgage company does have to send a letter or notice to the borrower about the assignment of the loan. This document will include the lender's identity and contact information, as well as all customer service and payment methods available.
When a mortgage is assigned, all of the original features of the mortgage remain the same. The interest rate, amount owed, monthly payment and payment schedules will not change. Any adjustments to an escrow account, which is a portion of the mortgage payment used to pay taxes and homeowner's insurance premiums, that result in a higher or lower mortgage payment are still done in accordance with the original escrow agreement. However, the new lender can make some modifications at the request of the borrower and at the lender's discretion, such as an additional payment method.
Effects on an Escrow
Generally, the municipality that is taxing the real estate and the homeowner's insurance company send the bills for the property directly to the mortgage lender that holds the escrow account. When the assignment is filed in the local recorder's office, a copy is sent to the taxing municipality with the new lender's address for the tax bills. The new lender will also contact the insurance company directly to ensure the payments for the premium are not interrupted.
When someone receives a notice of assignment from a new lender, it is advisable to call the original mortgage lender and make sure the loan has been assigned. One form of identity theft is through an assignment of mortgage. There have been some cases where a borrower received what appeared to be an assignment of mortgage from a legitimate but unfamiliar company, and the mortgage payments made to this new "lender" actually went to an individual or group committing fraud.
About the Author
Anna Assad began writing professionally in 1999 and has published several legal articles for various websites. She has an extensive real estate and criminal legal background. She also tutored in English for nearly eight years, attended Buffalo State College for paralegal studies and accounting, and minored in English literature, receiving a Bachelor of Arts.
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