An assignment of a mortgage occurs when a loan for a piece of property (home or otherwise) is assigned to another party. In some cases, the other party might be an official lender that takes over the loan. A corporate assignment of a mortgage occurs when the third party that assumes the obligation for the loan is a corporation. Again, this corporation might be a lender that is officially incorporated, or it might be some other business (or even individual) that is legally considered a corporation.
The Facts
During a corporate assignment of a mortgage, the legal obligation of one or the other party toward the mortgage is altered. The bank may choose to assign the mortgage to another lender, or the borrower may choose to assign the mortgage to a third-party corporation. In either case, the transfer initiates a change in the relationship that the parties have toward the mortgage, and since mortgages involve property and financial obligations toward it, the assignment results in a legal change in the status of the property ownership.
Significance
Corporate assignment of a mortgage occurs most frequently during the foreclosure process. The original--or current--lender for the mortgage may choose to transfer the mortgage to a different lender. On the other hand, the borrower who is paying on the loan may also choose to transfer the obligation of that loan to a third party, who will then assume the responsibility of making the payments. Both occurrences result in a corporate assignment of a mortgage, although the obligations about notification are different in both cases.
Requirements
When one lender transfers the loan to another, the assignment of the mortgage becomes a simple piece of paperwork within the mortgage documents. In fact, the borrower might not find out about the assignment until a change in the loan occurs. When a borrower assigns the mortgage to a third party corporation, however, the borrower must file official paperwork to record the assignment. The paperwork is simple, and forms are available online.
Considerations
A corporate assignment of a mortgage is a fully legal transfer, but the requirements about documentation and filing vary by state. In the case of borrowers who plan to transfer the mortgage to a third-party corporation, it is important to research state laws by contacting the state real estate board and to consult real estate attorneys for guidance before signing any forms. An incorrectly documented transfer might create a continued obligation on the original borrower.
Expert Insight
Mortgage assignments between lenders have become increasingly common, and they can create problems not only for borrowers who run into financial difficulty, but for home buyers interested in a piece of property. As a result, real estate experts caution home buyers to research the title of the property to ensure that any assignment of a mortgage was completed fully and that there are not multiple claims on the property.