What Is Assignment Of Mortgage And What Does It Mean For You?

Once you become a homeowner, you might assume that everything to do with your mortgage is set and will remain unchanged for the life of your loan. However, that’s not exactly true. In order to continue to write mortgages, your lender may sell your mortgage to an investor. That’s where assignment of mortgage comes into play.

As a homeowner, understanding assignment of mortgage can help you feel better prepared in the event that your lender transfers ownership of your mortgage.

What Does Assignment Of Mortgage Mean?

Assignment of mortgage is the process that records the legal transfer of a mortgage from a lender to another person or an entity. In essence, assignment of mortgage simply means that your lender has sold your mortgage note to a government-sponsored enterprise (GSE) or a private investor. Having effectively transferred your debt to another servicer, it likewise means that going forward from a set date, you’ll be making payments to the new loan holder.

Assignment of mortgage typically happens because, once you close on your mortgage loan, your lender will quickly sell the mortgage note to another entity. Doing so allows your mortgage provider to ensure future financial liquidity so that it can keep extending home loans to other borrowers. Under such a scenario, your original loan holder basically “flips” the mortgage and assigns its security rights in a home to the new owner of the note instead.

Does Assignment Of Mortgage Occur In Deed Of Trust States?

Note that in some states, deeds of trust are used in place of traditional mortgages. In the event that your property is located in one of these regions, the original lender will need to endorse the note over to the new owner to convey the security interest.

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Why Is An Assignment Of Mortgage Necessary?

Home buyers will sign many papers as part of the closing process on the purchase of a piece of property. However, the two most important include the mortgage note (which includes the terms regarding the repayment of the debt) and a mortgage. Legally, the term “mortgage” refers only to the document that states that the home can be sold in case of default. Under an assignment of mortgage, both documents are transferred to their new owner for servicing.

How Does An Assignment Of Mortgage Affect My Home Ownership?

The sale of the mortgage note and assignment of mortgage do not affect the terms of the contract contained in the note. Rather, an assignment of mortgage largely means that you’ll be making your same payments to a different lender. Likewise, it means that you’ll be calling a different number and dealing with a different group of customer service workers when you have a question or concern.

When Does A Mortgage Lender Sell A Mortgage Note?

Once a lender originates a mortgage, it tends to sell the mortgage almost immediately so that it can remain liquid and originate more loans to other borrowers in the future. The federal government actively encouraged the commonplace nature of this activity by creating government-sponsored enterprises Freddie Mac and Fannie Mae to buy mortgages from lenders so that mortgage lenders could continue making loans.

In fact, it’s not uncommon for your mortgage note to be sold many times over and over during the life of your home loan. The only material difference from a borrower’s standpoint is typically where they send their mortgage payments and who they contact when they need customer service.

Who Buys Mortgage Notes?

The large-scale purchase of mortgages has given rise to a secondary mortgage market, where individual buyers or groups of investors buy mortgage notes or shares of large groups of mortgages. These mortgages are seen as relatively safe investments that provide regular income that comes from a homeowner making their recurring monthly mortgage payments. Keeping this in mind, it’s quite typical for mortgages to be sold and resold frequently once issued as noted above.

How Do I Find Out Who Owns My Mortgage?

Your mortgage owner will contact you and make you aware an assignment of the mortgage has occurred. This information can also be found in the Mortgage Electronic Registration System (MERS), which banks rely on to track such transfers. Note that your current mortgage provider will also be in touch when an assignment of mortgage is pending to provide you with a heads-up and help ease the transition.

Assignment Of Mortgage FAQs

Learn more about assignment of mortgage by exploring the answers to some frequently asked questions below.

The Bottom Line

Assignment of mortgage is the legal process of recording the transfer of ownership of a mortgage from one person or entity to another. An assignment of mortgage doesn’t usually change the terms of the loan – just where and how borrowers should make their mortgage payments. Both lenders and homeowners should ensure that their assignment of mortgage is completed and recorded properly to avoid potential complications with the mortgage’s ownership down the line.