What is assignment of mortgage?

Introduction

The assignment of mortgage is a legal process that involves the transfer of a mortgage from one party to another. This transfer typically occurs when the original lender sells the mortgage to another entity, such as a bank or an investor. In this article, we will explore the concept of assignment of mortgage in detail, including its purpose, process, and implications.

What is Assignment of Mortgage?

Definition: Assignment of mortgage refers to the transfer of a mortgage from the original lender, known as the assignor, to another party, known as the assignee. This transfer allows the assignee to assume all the rights and obligations associated with the mortgage, including the right to collect payments from the borrower and the responsibility to enforce the terms of the loan.

Purpose: The primary purpose of assigning a mortgage is to provide liquidity to the original lender. By selling the mortgage to another entity, the lender can free up capital to fund new loans. Additionally, assignment of mortgage allows lenders to manage their risk by transferring the loan to an entity with a higher risk tolerance or better expertise in managing mortgage portfolios.

The Assignment Process

Documentation: The assignment of mortgage is typically documented through a legal instrument called an assignment of mortgage or an assignment agreement. This document outlines the terms of the transfer, including the names of the assignor and assignee, the mortgage details, and any conditions or restrictions associated with the transfer.

Recording: In most jurisdictions, the assignment of mortgage must be recorded in the local land records office to provide notice to the public and protect the assignee’s interests. Recording the assignment helps establish the assignee’s priority in case of competing claims on the property. Failure to record the assignment may result in the assignee losing their rights to the mortgage.

Implications of Assignment of Mortgage

Impact on Borrowers: For borrowers, the assignment of mortgage does not typically result in any immediate changes to their loan terms or payment obligations. They are still required to make their mortgage payments to the assignee as per the original loan agreement. However, borrowers should be aware that the assignee may have different policies and procedures for servicing the loan, which could impact the borrower’s experience.

Foreclosure Proceedings: In the event of default, the assignee of the mortgage has the right to initiate foreclosure proceedings against the borrower. Foreclosure is a legal process through which the lender can recover the outstanding balance of the loan by selling the property securing the mortgage. The assignee, as the new owner of the mortgage, has the authority to enforce this right.

Conclusion

In conclusion, the assignment of mortgage is a legal process that involves the transfer of a mortgage from the original lender to another party. This transfer allows lenders to free up capital, manage risk, and provide liquidity to the mortgage market. For borrowers, the assignment typically does not result in immediate changes to their loan terms, but they should be aware of potential differences in servicing practices. The assignment of mortgage plays a crucial role in the functioning of the mortgage industry and has significant implications for all parties involved.