What Is Assignment Of Mortgage And What Does It Mean For You?
An assignment of mortgage may sound somewhat intimidating at first, especially if you receive a notice about one out of the blue from your current loan provider. But in actuality, an assignment of mortgage is a quite common and routine practice in real estate circles that’s nothing to worry about. In essence, it simply means that your lender has sold your mortgage note to a government-sponsored enterprise (GSE) or a private investor. Having effectively transferred your debt to another servicer, it likewise means that going forward from a set date, you’ll be making payments to the new loan holder.
This typically happens because once you close on your mortgage loan, your lender will quickly look to sell the mortgage note on to another entity. Doing so allows your mortgage provider to ensure future financial liquidity so that it can keep extending home loans to other borrowers. Under such a scenario, your original loan holder basically “flips” the mortgage and assigns its security rights in a home to the new owner of the note instead.
What Does Assignment Of Mortgage Mean?
An assignment of mortgage is a legal term that refers to the transfer of the security instrument that underlies your mortgage loan − aka your home. When a lender sells the mortgage on, an investor effectively buys the note, and the mortgage is assigned to them at this time. The assignment of mortgage occurs because without a security instrument attached to the sale (aka the mortgage), this purchasing investor could, in theory, receive monthly mortgage payments, but hold no legal right to take action if you defaulted on making timely payments.
Note that in some states, deeds of trust are used in place of mortgage instruments. In the event that your property is located in one of these regions, a lender need only endorse the note over to the new owner to convey the security interest.
When Does A Mortgage Lender Sell A Mortgage Note?
Quite quickly, as it turns out. Once a lender originates a mortgage by cutting you a check at closing, it tends to sell the mortgage almost immediately so that it can remain liquid and originate more loans to other borrowers in the future. The federal government actively encouraged the commonplace nature of this activity by creating government-sponsored enterprises Freddie Mac and Fannie Mae to buy mortgages from lenders so that mortgage lenders could continue making loans. In fact, it’s not uncommon for your mortgage note to be sold many times over and over during the life of your home loan. The only material difference from a borrower’s standpoint is typically where they send their mortgage payments and who they contact when they need customer service.
Who Buys Mortgage Notes?
The large-scale purchase of mortgages has given rise to a secondary mortgage market, where individual buyers or groups of investors buy mortgage notes or shares of large groups of mortgages. These mortgages are seen as relatively safe investments that provide regular income that comes from a homeowner making regular and recurring monthly mortgage payments. Keeping this in mind, it’s quite typical for mortgages to be sold and resold frequently once issued as noted above.
Why Is An Assignment Of Mortgage Necessary?
Home buyers will sign many papers as part of the closing process on the purchase of a piece of property. However, the two most important include the mortgage note (which includes all of the terms regarding the repayment of the debt) and a mortgage. Legally, the term “mortgage” refers only to the document that states that the home can be sold in case of default. Under an assignment of mortgage, both documents are transferred to their new owner for servicing.
How Does An Assignment Of Mortgage Affect My Home Ownership?
Not much in any material fashion, as the sale of the mortgage note and assignment of mortgage do not affect the terms of the contract contained in the note. Rather, an assignment of mortgage largely means that you’ll be making your same old payments to a different lender at a different online or physical address. Likewise, it means that you’ll be calling a different number and dealing with a different group of customer service workers when you have a question or concern.
How Do I Find Out Who Owns My Mortgage?
For one, the mortgage owner will contact you and make you aware an assignment of mortgage has occurred. This information can also be found in the Mortgage Electronic Registration System (MERS), which banks rely on to track such transfers. Note that your current mortgage provider will also be in touch when an assignment of mortgage is pending to provide you with a heads-up and help ease the transition.
The Bottom Line: Your Mortgage Has A Life Of Its Own After You Close
As a home buyer, the terms of your mortgage shouldn’t change after closing, although expenses related to select taxes, insurance payments and (in the case of adjustable-rate mortgages) interest rates may shift at a later date. These changes have nothing to do with who services your loan. The terms of your mortgage cannot be changed by a new owner.
While terms stay the same, the servicer of your mortgage may change many times over the course of your home loan’s tenure, as mortgages are routinely bought and sold by providers on the secondary market. That’s because your mortgage represents a plum investment opportunity (complete with regular, recurring payments) to many investors.
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