Foreclosure Defenses: Was There a Proper Assignment of the Mortgage?

Banks and mortgage companies frequently sell and buy home loans from each other. An "assignment" is a document that's the legal record of a mortgage transfer from one entity to another.

If you're a homeowner facing foreclosure and the lender sold your loan to a new owner but didn't complete a proper assignment of mortgage, you might be able to challenge the foreclosure in court.

What Is a Mortgage, and What Is a Promissory Note?

If you took out a loan to buy your home, you most likely signed a mortgage, deed of trust, or another security instrument and a promissory note. (This article uses the term "mortgage" to cover deeds of trust and other similar documents.)

• Mortgage. The mortgage is the document that pledges the property as security (collateral) for the debt and permits the lender to foreclose if you fail to make the monthly payments.
• Promissory note. The promissory note is the document that contains your promise to repay the loan.

The purpose of the mortgage is to provide collateral for the debt created by the promissory note.

How Lenders Transfer Mortgage Loans to Other Banks or Companies

When a lender, bank, or mortgage company sells a home loan to another entity, the seller usually takes the following steps.

• Endorsement. It endorses the promissory note (signs it over) to the new loan owner. The promissory note owner is the only party with the legal right (called "standing") to collect payment on the debt.
• Assignment. The seller also prepares an assignment of mortgage to the new entity and, usually, records the assignment in the county records. An assignment of mortgage gives the loan seller's rights under the mortgage, including the right to foreclose if the borrower doesn't make payments, to the new owner of the loan.

What Is Included in a Mortgage Assignment Document?

Assignments typically have the following information:

• the name of the assignor (the current owner of the loan, like the original lender) and assignee (the new owner)
• the borrowers' names
• the mortgage date
• the original amount of the loan
• the original mortgage recording information, and
• the property's legal description.

Can You Challenge a Foreclosure If the Mortgage Assignment Is Missing?

An assignment of mortgage serves as proof of the loan's transfer from one party to another. Courts have dismissed some foreclosure cases when the foreclosing party couldn't produce an assignment.

Challenging a Foreclosure Based on a Faulty Assignment

Depending on state law, if the lender doesn't have an assignment or didn't record it properly, you might be able to challenge the foreclosure on the grounds that the foreclosing party doesn't have the right to foreclose or didn't follow proper procedures. In Wyoming, for example, the assignment must be recorded prior to the start of the foreclosure. (Wyo. Stat. § 34-4-103 (2025).) Some other states have similar laws.

However, Some States Don't Allow Borrowers to Challenge Assignments

However, some states don't allow borrowers to challenge the legality of assignments. For example, the West Virginia Supreme Court has said only the parties to assignments of mortgages have standing to challenge their validity. Borrowers don't have standing because they're not parties to the assignments or intended third-party beneficiaries. (See Pavone v. NPML Mortgage Acquisitions, LLC, 246 W.Va. 418 (2022).)

Similarly, the Nebraska Supreme Court held that borrowers don't have standing to challenge an assignment of their mortgage because they're not a party to the assignment. (See Marcuzzo v. Bank of the West, 290 Neb. 809, 862 N.W.2d 281 (2015).)

Some States Say the Mortgage Follows the Note

Also, some states follow the general rule that "a mortgage follows the note." So, the absence of an assignment of mortgage won't necessarily stop a foreclosure. If the foreclosing party is clearly entitled to enforce the promissory note, the court may allow a foreclosure to proceed even if a valid assignment doesn't exist.

State Law Determines If an Assignment Is Required

Whether a written, recorded assignment is needed depends on state law. Talk to a local foreclosure attorney to learn the laws and legal requirements regarding mortgage assignments in your state.

What Is MERS and How Does It Affect Mortgage Assignments?

Mortgage Electronic Registration System, Inc. (MERS) is a company that the mortgage banking industry created to simplify the assignment process. Here's how MERS works: In many mortgage transactions, the mortgage will designate MERS as a nominee for the lender. In other cases, the loan might be assigned to MERS (solely as a nominee for the loan owner) at some point later in its life cycle after the loan closes. MERS then acts as an agent for the loan owner but doesn't actually possess a beneficial interest in the note. Instead, MERS simply tracks the mortgage as it's transferred from owner to owner. Once a loan has been assigned to MERS, it can be bought and sold any number of times later without recording assignments.

Don't be surprised if you find out that your mortgage was assigned to MERS at some point. In most cases, the loan will have to be assigned out of MERS' name before a foreclosure can begin.

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Talk to a Lawyer If You Want to Challenge a Foreclosure

If you're facing a foreclosure and think the chain of assignments has a gap, speak to a qualified attorney who can advise you about what to do in your circumstances. You might be able to fight the foreclosure.

Keep in mind that any given foreclosure or legal situation has many potential claims and defenses. A local lawyer or a legal aid organization can help you explore all possible defenses that might be available in your particular circumstances.