What is an Assignment of Mortgage and Why Is It Important In a Foreclosure Action?
UPDATE: If you are new to this article be sure to read and scroll all the way down. The meat of this article is in the tremendous information profided in the comments by mortgage professionals and attorneys.
Foreclosure is the process by which a financial institution (e.g., your bank/loan servicer) can reclaim your home and/or land if you fail to make timely mortgage payments.
In a foreclosure action, the bank files a complaint with the state court to foreclosure the property. Oftentimes, banks do not have the right to bring such action due to lack of an assignment of mortgage.
An assignment of mortgage is a written document which serves as proof of transfer of a loan obligation from the original borrower to a third party.
First and foremost, it is important for you to understand the legalities of foreclosure and your rights for mortgage foreclosure solutions. There are two basic documents involved in a bank loan transaction, the promissory note and the mortgage. The note is a contract that details the terms of a promise by you to pay a sum of money to the bank.
The terms of a note typically include the principal amount, the interest rate if any, and the maturity date. It also may contain provisions concerning the bank’s rights in the event of default, which may include foreclosure of your property.
The mortgage is a method of using property, real or personal, as security for the performance of an obligation, usually the payment of a debt. It gives the bank the right to take away your property if you do not pay as it is specified in the note. Essentially, the mortgage is what gives the bank the right to foreclose.
The note, by itself, is considered to be an unsecured debt. On the other hand, the note accompanied with the mortgage comprises a secured debt. The difference between these two is that a secured debt allows the bank to force sale of the property, which in turn permits satisfaction of the loan in case of default by you, the borrower. However, without the mortgage, banks cannot force sale of the property to satisfy the debt.
In many cases, when a bank lends you money to purchase a home, it will subsequently sell the note along with the mortgage to investors in the secondary market. The secondary market manages mortgages that were originated in the primary market. It consists of investors, both public and private, who buy the mortgage notes.
This allows the mortgage lenders to replenish the cash reserves, so that they can originate more mortgages to more consumers. In this way, the investors profit from the interests that the mortgages charge.
Furthermore, it should be noted that when a loan is sold in the secondary market, the bank is no longer the owner of the note and mortgage. However, the bank’s rights under the mortgage are not automatically assigned to the investors. In order to assign such rights, an assignment of mortgage is necessary.
Generally, a title search of the property is conducted to determine whether an assignment of mortgage has been recorded. If an assignment does exist, then a defense is available to delay your case and/or prevent foreclosure of your property.
Once your situation is completely assessed, a mortgage foreclosure solution can be recommended. We are here to work on your behalf to come up with the best course of action to prevent foreclosure. Our team of attorneys specializes in helping clients who have fallen behind on their mortgages payments and who wish to avoid foreclosure.
The article is not intended to be legal advice. If you are faced with a foreclosure action please consult with an experienced real estate litigation attorney. Wesoloski Carlson, P.A. is a law firm based in Miami, Florida and its attorneys are licensed in the State of Florida.
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