Mortgage Assignment Laws

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What’s a Mortgage Assignment?

A mortgage assignment, or “assignment of mortgage”, is a type of agreement where a borrower transfers their loan obligations to a third party.  The newer lender “stands in the shoes” of the old lender and assumes the rights and duties associated with the mortgage agreement.  This is similar to the idea of contract assignments in other areas of law.

When a mortgage assignment occurs, the bank or lending institution will usually want to retain some of their rights even after the transfer, such as their right to foreclose on the home in the event of non-payment.  The bank’s rights may need to be recorded in a separate document from the one that assigns the mortgage to the third party.

Should Mortgage Assignments be Recorded?

In order to prevent confusion or a “cloud” on the property title, it’s important that any mortgage assignments be recorded with the county recorder’s office.  This is the place that stores and maintains records of property titles and transactions affecting deeds and titles. 

Generally, a title search at the recorder’s office is supposed yield information as to whether there has been an assignment of mortgage rights.  Any records of an assignment can affect subsequent legal proceedings, such as a foreclosure proceeding or a judicial lien hearing.

What are Some Benefits and Drawbacks of Mortgage Assignments?

One of the main benefits of a mortgage assignment is that it may allow property that’s been on the market for a while to be sold.  In many cases, mortgage assignments allow buyers to purchase a house without having to contact a bank or lending institution for a loan, since they can just have the previous party’s mortgage duties assigned to them. 

Most banks understand the need for mortgage assignment and may even offer special packages for the transfer process.

On the other hand, one of the main drawbacks of mortgage assignments occurs where the assignment isn’t written down or recorded with the county.  This can create confusion as to which parties are responsible for mortgage payments or for back debt payments.  Also, non-payment of the monthly amounts owed can create issues, especially where the original lender was already in debt when they assigned the mortgage.

Do I Need a Lawyer for Help With Mortgage Assignments?

Like any mortgage contract, assignments generally require the assistance of a lawyer.  Since they involve several different parties, mortgage assignments can sometimes be complicated.  You may wish to work with a real estate lawyer in your area if you need assistance with a mortgage assignment or other legal issues.  Also, if you will be purchasing a home, a lawyer can help you conduct a title search to determine if there are any outstanding assignments or debts associated with the property. 

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Last Modified: 11-13-2012 03:36 PM PST

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