If you took out a loan to buy your home, you most likely signed a mortgage (or 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.)
The purpose of the mortgage is to provide collateral for the debt that's evidenced by the promissory note.
Banks and mortgage companies frequently sell and buy home loans from each other. An "assignment" is the document that's the legal record of this 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.
When a lender, bank, or mortgage company sells a home loan to another entity, the seller usually takes the following steps.
Assignments typically have the following information:
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. 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.
But 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. NPL Mortgage Acquisitions, LLC.) 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.
Whether a written, recorded assignment is needed depends on state law. 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 the chain of assignments has a gap, speak to a qualified attorney who can advise you about what to do in your circumstances.
Keep in mind that any given foreclosure or legal situation has many potential claims and defenses. Talk to local counsel or a legal aid organization to explore all possible defenses that might be available in your particular circumstances.