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Which date determines the effective date of a mortgage

Customer Question
assignment the date that...
which date determines the effective date of a mortgage assignment the date that it was signed or the date the contract was filed with the record
JA: What steps have been taken so far? Has any paperwork been prepared or filed?
Customer: yes i have filed for an appeal and the mortgage servicing company stand is that the date the assignment was filed is the intended date
JA: Where is the property located?
Customer: in Dallas tx
JA: Anything else you want the lawyer to know before I connect you?
Customer: no
Submitted: 1 month ago.Category: Real Estate Law
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11/10/2017
Real Estate Lawyer: Attyadvisor, Attorney replied 1 month ago
Attyadvisor
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Real Estate Lawyer: Attyadvisor, Attorney replied 1 month ago

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

If your mortgage has changed hands since you first took it out and the foreclosing bank doesn't have a valid assignment of mortgage, you may be able to challenge the foreclosure.

If you are a homeowner facing foreclosure and there has not been a proper assignment of mortgage, you may 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.

Understanding Loan Transactions

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.

Mortgages and Promissory Notes

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.

Mortgage Assignments

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

The assignment of mortgage serves as proof of the transfer of the loan from one party to another.

Loan Transfers

When one bank sells the debt to another bank, the following actions are generally done to complete the transaction.

  • The promissory note is endorsed (signed over) to the new bank. (The owner of the promissory note is the only party that has the legal right to collect on the debt. Learn more in our article "Produce the Note" Defense in Foreclosure.)
  • An assignment of mortgage to the new entity is recorded in the county records. (An assignment of mortgage is necessary to assign the original bank’s rights under the mortgage, including the right to foreclose if you don't make payments, to the new owner of the loan.)...

The Role of MERS in the Assignment Process

Mortgage Electronic Registration System, Inc. (MERS) is a company that was created by the mortgage banking industry to simply the assignment process.

In many mortgage transactions, the mortgage will designate MERS as a nominee for the lender. In other cases, the loan may be assigned to MERS (solely as a nominee for the lender) at some point later in its life cycle after the loan closes. MERS then acts as an agent for the owner of the loan, but it does not actually possess a beneficial interest in the note. Rather, MERS simply tracks the mortgage for its members as it is transferred from bank to bank. Once the loan has been assigned to MERS, the loan can be bought and sold any number of times later without recording an additional assignment.

Don't be surprised if you find out that your mortgage was assigned to MERS at some point. In most cases, there must be an assignment out of MERS’ name before the foreclosure can begin.

Learn more about MERS in our article What is MERS?

What Happens When There Isn’t An Assignment to the Foreclosing Party

Courts have dismissed foreclosure cases when the foreclosing party cannot produce a written assignment of mortgage. Some of these decisions are based in part on state law requirements that mortgage assignments be recorded.

In Wyoming, for example, the assignment must be recorded prior to the start of the foreclosure (Wyo. Stat. Ann. § 34-4-103). (Learn more about Wyoming foreclosures.) This means that, depending on state law, if the lender cannot produce a proper assignment or does not record it at the proper time, you may be able to challenge the foreclosure on the grounds that the foreclosing party does not have the right to foreclose.

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 about the foreclosure laws in your state, check our State Foreclosure Laws topic area.)

Fighting the Foreclosure

How you challenge the foreclosure depends on whether your foreclosure is judicial or nonjudicial.

Judicial foreclosure. In a judicial foreclosure, the bank files a lawsuit in state court. You will receive a foreclosure complaint, petition, or similar document, along with a summons. In this type of foreclosure, you can bring up any assignment defects as part of that lawsuit. (To learn more, read our article How to Fight a Foreclosure in Court: Judicial Foreclosure.)

Nonjudicial foreclosure. With a nonjudicial foreclosure, the bank can foreclose without going to court. So, you'll need to file your own lawsuit to bring up this issue. (To learn more, read our article How to Fight a Foreclosure in Court: Nonjudicial Foreclosure.)”

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