Real Estate Law
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Hi, am glad that you understand. It is not an easy concept to explain,
Okay, now we are at the Office of the Recorder of Deeds and there is no recorded Assignments of the Deed of Trust. So far, so good.
But, remember that I told you in one of my previous Answers that recording is not necessary to have a legally enforceable Assignment. Recording is really for the protection of the Assignee (the new lender). Let me show you why by the following example,
1. Assume First National Bank of Arizona received payment from GMAC and in exchange, First National Bank of Arizona executed an Assignment of Deed of Trust to GMAC and also transferred to GMAC the original Note and original Deed of Trust executed by the borrower. GMAC did not record the Assignment of Deed of Trust.
2. Let us also assume that First National Bank of Arizona was desperate for money and went to Baljit Kaur National Bank and said, "If you pay me $50,000, I will execute an Assignment of a Deed of Trust and the Note worth $100,000 to you and I will give you the original Note and Deed of Trust in 10 days." (Of course, the First National Bank of Arizona was lying beause it had already given the Original Note and original Deed of Trust to GMAC with their Assignment of Deed of Trust). The Baljit Kaur National Bank checked in the Office of the Recorder of Deeds for Montgomery County and did not see any Assignments made by First National Bank of Arizona to any other bank, so Baljit Kaur National Bank paid $50,000 to First National Bank of Arizona. and received an Assignment of Deed of Trust, but did not record it either.
The borrower lost his job and stopped making payments under the Note. Both GMAC and the Baljit Kaur National Bank instituted a lawsuit against the Borrower to foreclose on the Deed of Trust. Which bank will win ?
Since GMAC received an Assignment of Deed of Trust before the Baljit Kaur National Bank and because GMAC also held the original Note and original Deed of Trust which it received when it received the Assignment of Deed of Trust, it can continue its lawsuit to foreclose on the Deed of Trust. The fact that GMAC did not record their Assignment of Deed of Trust does not affect its validity, or enforceability, it is still a legally enforceable Assignment of Deed of Trust .
The recourse of the Baljit Kaur National Bank is to sue the First National Bank of Arizona for fraud.
Now, in your present situation, before you start any lawsuit against the foreclosing lender, you should ask them to produce the original Note, the original Deed of Trust, and their Assignment of Deed of Trust to prove ownership. Because, you have to remember that failure to record the Assignment will not affect its enforceability. But, in order to continue its foreclosure action, it must prove that it holds both the original Note and the original Deed of Trust and it is the legal owner of both by virtue of the Assignment of Deed of Trust.
I hope I did not confuse you, but I wanted to give you an example of how and why the failure to record an Assignment of Deed of Trust will not automatically invalidate the Assignment of Deed of Trust as long as the new lender holds in its possession the Original Note and the Original Deed of Trust.
Therefore, you must first ask Mellon Bank to produce the original Note, the Original Deed of Trust, and the Assignment of Deed of Trust from GMAC to Mellon. If Mellon cannot produce these documents, then it cannot proceed with any foreclosure,
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