If you are a homeowner facing foreclosure and there has not been a proper assignment of mortgage, depending on state law, you might be able to challenge the foreclosure. Read on to learn more about assignments, why they are important, and find out what to do if you suspect there wasn’t a valid assignment of mortgage in your case.
To fully understand the role of an assignment in a mortgage foreclosure, you must understand the basic terms, documents, and players involved in residential loan transfers.
When you took out your loan, you signed both a mortgage (or deed of trust) and a promissory note. (Learn more in our article What's the Difference Between a Mortgage and Deed of Trust? For purposes of this discussion, the terms mortgages and deeds of trust are used interchangeably.)
The mortgage is the document that pledges the property as security for the debt and permits a lender to foreclosure if you fail to make the monthly payments. The promissory note is the IOU that contains the promise to repay the loan. The purpose of the mortgage is to provide security for the loan that is evidenced by a promissory note.
Banks frequently sell and buy mortgages from each other. An “assignment” is the document that is the legal record of this transfer from one entity to another. Assignments typically contain the following information:
The assignment of mortgage serves as proof of the transfer of the loan from one party to another.
When one bank sells the debt to another bank, the following actions are generally done to complete the transaction.
(Learn more in our article What's the difference between a mortgage assignment and an endorsement (transfer) of the note?)
Courts have dismissed foreclosure cases when the foreclosing party cannot produce a written assignment of mortgage. Depending on state law, if the lender cannot produce a proper assignment or did not record it at the proper time, you might be able to challenge the foreclosure on the grounds that the foreclosing party does not have the right to foreclose. In Wyoming, for example, the assignment must be recorded prior to the start of the foreclosure. (Wyo. Stat. Ann. § 34-4-103).
In some cases though, the absence of a proper assignment of mortgage will not stop a foreclosure. If the foreclosing party is clearly entitled to enforce the promissory note secured by a mortgage, the court may allow a foreclosure to proceed even if there is no written assignment because of the general rule that “a mortgage follows the note.”
To learn the laws and legal requirements regarding mortgage assignments in your state, talk to a local foreclosure attorney.
If you're facing a foreclosure and think that there's a problem with the assignment of mortgage in your case, you should speak to a qualified attorney who can advise you about what to do in your circumstances.
Additionally, any given foreclosure or legal situation has many potential claims and defenses. It is recommended that you seek the advice of local counsel or a legal aid organization to explore all possible defenses that might be available in your particular situation.