meaning mortgage assignment

Understanding the Assignment of Mortgages: What You Need To Know

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A mortgage is a legally binding agreement between a home buyer and a lender that dictates a borrower's ability to pay off a loan. Every mortgage has an interest rate, a term length, and specific fees attached to it.

Written by Attorney Todd Carney .  Updated November 26, 2021

If you’re like most people who want to purchase a home, you’ll start by going to a bank or other lender to get a mortgage loan. Though you can choose your lender, after the mortgage loan is processed, your mortgage may be transferred to a different mortgage servicer . A transfer is also called an assignment of the mortgage. 

No matter what it’s called, this change of hands may also change who you’re supposed to make your house payments to and how the foreclosure process works if you default on your loan. That’s why if you’re a homeowner, it’s important to know how this process works. This article will provide an in-depth look at what an assignment of a mortgage entails and what impact it can have on homeownership.

Assignment of Mortgage – The Basics

When your original lender transfers your mortgage account and their interests in it to a new lender, that’s called an assignment of mortgage. To do this, your lender must use an assignment of mortgage document. This document ensures the loan is legally transferred to the new owner. It’s common for mortgage lenders to sell the mortgages to other lenders. Most lenders assign the mortgages they originate to other lenders or mortgage buyers.

Home Loan Documents

When you get a loan for a home or real estate, there will usually be two mortgage documents. The first is a mortgage or, less commonly, a deed of trust . The other is a promissory note. The mortgage or deed of trust will state that the mortgaged property provides the security interest for the loan. This basically means that your home is serving as collateral for the loan. It also gives the loan servicer the right to foreclose if you don’t make your monthly payments. The promissory note provides proof of the debt and your promise to pay it.

When a lender assigns your mortgage, your interests as the mortgagor are given to another mortgagee or servicer. Mortgages and deeds of trust are usually recorded in the county recorder’s office. This office also keeps a record of any transfers. When a mortgage is transferred so is the promissory note. The note will be endorsed or signed over to the loan’s new owner. In some situations, a note will be endorsed in blank, which turns it into a bearer instrument. This means whoever holds the note is the presumed owner.

Using MERS To Track Transfers

Banks have collectively established the Mortgage Electronic Registration System , Inc. (MERS), which keeps track of who owns which loans. With MERS, lenders are no longer required to do a separate assignment every time a loan is transferred. That’s because MERS keeps track of the transfers. It’s crucial for MERS to maintain a record of assignments and endorsements because these land records can tell who actually owns the debt and has a legal right to start the foreclosure process.

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Assignment of Mortgage Requirements and Effects

The assignment of mortgage needs to include the following:

The original information regarding the mortgage. Alternatively, it can include the county recorder office’s identification numbers. 

The borrower’s name.

The mortgage loan’s original amount.

The date of the mortgage and when it was recorded.

Usually, there will also need to be a legal description of the real property the mortgage secures, but this is determined by state law and differs by state.

Notice Requirements

The original lender doesn’t need to provide notice to or get permission from the homeowner prior to assigning the mortgage. But the new lender (sometimes called the assignee) has to send the homeowner some form of notice of the loan assignment. The document will typically provide a disclaimer about who the new lender is, the lender’s contact information, and information about how to make your mortgage payment. You should make sure you have this information so you can avoid foreclosure.

Mortgage Terms

When an assignment occurs your loan is transferred, but the initial terms of your mortgage will stay the same. This means you’ll have the same interest rate, overall loan amount, monthly payment, and payment due date. If there are changes or adjustments to the escrow account, the new lender must do them under the terms of the original escrow agreement. The new lender can make some changes if you request them and the lender approves. For example, you may request your new lender to provide more payment methods.

Taxes and Insurance

If you have an escrow account and your mortgage is transferred, you may be worried about making sure your property taxes and homeowners insurance get paid. Though you can always verify the information, the original loan servicer is responsible for giving your local tax authority the new loan servicer’s address for tax billing purposes. The original lender is required to do this after the assignment is recorded. The servicer will also reach out to your property insurance company for this reason.  

If you’ve received notice that your mortgage loan has been assigned, it’s a good idea to reach out to your loan servicer and verify this information. Verifying that all your mortgage information is correct, that you know who to contact if you have questions about your mortgage, and that you know how to make payments to the new servicer will help you avoid being scammed or making payments incorrectly.

Let's Summarize…

In a mortgage assignment, your original lender or servicer transfers your mortgage account to another loan servicer. When this occurs, the original mortgagee or lender’s interests go to the next lender. Even if your mortgage gets transferred or assigned, your mortgage’s terms should remain the same. Your interest rate, loan amount, monthly payment, and payment schedule shouldn’t change. 

Your original lender isn’t required to notify you or get your permission prior to assigning your mortgage. But you should receive correspondence from the new lender after the assignment. It’s important to verify any change in assignment with your original loan servicer before you make your next mortgage payment, so you don’t fall victim to a scam.

Attorney Todd Carney

Attorney Todd Carney is a writer and graduate of Harvard Law School. While in law school, Todd worked in a clinic that helped pro-bono clients file for bankruptcy. Todd also studied several aspects of how the law impacts consumers. Todd has written over 40 articles for sites such... read more about Attorney Todd Carney

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Home > Amerinote Xchange Blog > Market Trends > Understanding Mortgage Assignment: How It Works and What You Need to Know

Understanding Mortgage Assignment: How It Works and What You Need to Know

Jennifer Park Published: July 15, 2024 | Updated: July 10, 2024

When a homebuyer gets a mortgage, they agree to pay back the money they borrowed from a lender, usually a bank. These payments are usually made over a period of many years with interest, which is how the lender makes money.  If the borrower doesn’t make payments, the mortgage gives the lender the ability to foreclose on the property to recoup their investment. 

Sometimes, though, the lender decides they don’t want to wait for those years of payments. Instead, they might choose to sell the mortgage to another company. This transfer is called a mortgage assignment, or in some states, an assignment of deed of trust. Here’s everything you should know about how mortgage assignments work.

What is an Assignment of Mortgage?

An assignment of mortgage, or assignment of deed of trust, is a process where the original lender transfers their interest in a mortgage to another party. This could be another bank, a special company that handles mortgages, or an investor interested in buying debts. The original lender sells the right to collect payments from the homebuyer to someone else. This is done with legal agreements to ensure everything is fair and follows the law.

This process is important for lenders because it allows them to get back much of the money they lent without waiting for the 20 or 30 years it might take the borrower to pay it all back. For the new owner of the mortgage, it’s a chance to invest in a steady flow of income.

Some mortgage lenders are homeowners who became mortgage note holders when they sold their house. If the prospective buyer is not able to secure a loan from a bank, these homeowners might choose to offer seller financing . In this arrangement, the seller acts as the lender, agreeing to sign over the house in return for receiving monthly payments until the value of the loan is paid off.

However, if circumstances change and the homeowner wants to receive a lump sum payment or no longer wants the responsibility of managing the loan, they might consider selling the mortgage note to an investor or a specialized company. This sale is facilitated through the mortgage assignment process, transferring all rights and responsibilities to the new owner.

The Mortgage Assignment Process

Let’s walk through what happens during a mortgage assignment:

• Decision to Sell the Mortgage: The lender decides they would like to sell the mortgage. This could be because they no longer want to bear the risk of the loan, or would like to receive a lump sum payment.
• Finding a Buyer: The lender looks for a party interested in buying your mortgage. This buyer could be another bank, a company that specializes in buying and managing mortgages, or even a group of investors. The important thing is that they have the money to buy the mortgage and are willing to take on the responsibility of collecting payments.
• Handling the Legal Paperwork: Once a buyer is found, there’s a lot of paperwork to handle. The most important piece is the “assignment of mortgage document or the “assignment of deed of trust”, a document that officially transfers the ownership of the mortgage from the old lender to the new one. This document must be signed and usually notarized, which means an official witness confirms that all parties signed willingly and correctly. There must also be a transfer of the promissory note, through a process known as mortgage endorsement .
• Notifying the Homeowner: After the mortgage is officially transferred to the new owner, the homeowner will be notified. This notification lets them know who the new owner of their mortgage is, their contact information and where to send their future mortgage payments. 

Deed of Trust vs. Mortgage

In some states, instead of a mortgage note, the lender may have something called a deed of trust. This can also be transferred to a buyer in the same way. A deed of trust and a mortgage both serve the same purpose — to secure a loan on a property. There are  some key differences in how they operate .

Deed of Trust

Involves Three Parties: A deed of trust involves three parties: the borrower, the lender and a trustee. The trustee holds the legal title to the property until the loan is fully paid off.

Non-Judicial Foreclosure: In most cases, a deed of trust allows for non-judicial foreclosure, meaning the trustee can sell the property without court involvement if the borrower defaults on the loan.

Involves Two Parties: A traditional mortgage involves just two parties: the borrower and the lender. The legal title remains with the borrower, and the lender has a lien on the property.

Judicial Foreclosure : Foreclosure under a mortgage typically requires going through the court, making it a longer and possibly more complicated process than with a deed of trust.

Legal and Regulatory Considerations

When a mortgage is assigned from one lender to another, several legal and regulatory considerations must be addressed to ensure the process is handled correctly. Each state has its own laws that affect how mortgages can be transferred, which is why it can be important to know your local rules before selling your mortgage note.

State Laws on Mortgage Assignment

State laws dictate how a mortgage assignment must be recorded and what documentation is required. For example, some states require that the assignment of the mortgage document be filed with the county where the property is located. This helps maintain a clear and public record of who owns the mortgage. Additionally, these laws ensure that the homeowner is protected and that the transfer of mortgage ownership is transparent.

Judicial vs. Non-Judicial Foreclosure Processes

Depending on the state, the foreclosure process can vary significantly. In judicial foreclosure states, the lender must go through the court system to foreclose on a home. This process can be lengthy and requires filing a lawsuit and getting a court judgment. In non-judicial foreclosure states, lenders can foreclose without court involvement if the mortgage agreement includes a power of sale clause. This clause allows the lender to sell the property to pay off the mortgage if the homeowner defaults. 

Compliance Requirements

During a mortgage assignment, all parties must comply with federal and state regulations that protect homeowners. For instance, the  Real Estate Settlement Procedures Act (RESPA) requires that borrowers be notified of any change in the ownership of their mortgage. This notification must be sent within 15 days after the mortgage has been sold or assigned. Ensuring compliance helps maintain trust and avoids legal complications.

Why Sell a Mortgage?

You might wonder why a lender would want to sell a mortgage to a mortgage note buyer instead of just waiting to collect all the payments. There are several reasons why selling the mortgage can be beneficial for the lender:

• Managing Financial Resources: By selling a mortgage, lenders can get a large amount of money upfront instead of waiting for monthly payments. This immediate influx of cash can help them invest in other areas, offer more loans, or strengthen their financial footing.
• Risk Management: Holding onto a mortgage comes with risks, especially if the homeowner has trouble making payments. By selling the mortgage, the original lender transfers this risk to the buyer of the mortgage. This can be a strategic move to manage the lender’s overall risk exposure.
• Investment Strategy: Lenders might sell mortgages as part of their investment strategy. Selling mortgages can help them diversify their investments and adjust their portfolios according to market conditions or their financial goals.

Choosing the Right Buyer For A Mortgage Note

For lenders, finding the right mortgage or deed of trust buyer is an important part of the assignment process. Here are some criteria to consider when selecting a mortgage note buyer :

• Reputation and Reliability: The reputation of the buyer is vital. Lenders should look for buyers who have a solid track record of fair dealings and reliability. A good indicator are reviews from actual buyers and a brand presence. This ensures that the mortgage will be managed properly after the assignment.
• Transparency: Transparency during the mortgage assignment process is essential for trust. Buyers who provide clear information about the terms of the purchase and who maintain open communication are preferable.
• Competitive Pricing: Finally, the price offered for the mortgage note is a critical factor. Lenders should seek buyers who offer competitive pricing, which reflects the value of the mortgage and the income it generates.

Jennifer Park

Jennifer is an expert writer who focuses primarily on writing finance, investing, and real estate topics. She has been working as a writer since 2013. See full bio.

Molly Corson

Molly Corson is the Co-Founder and Marketing Director at Amerinote Xchange. Molly's diversified background and experience lies in the areas marketing ad-tech, team-building, operations-management, sales and strategic relations management. Molly has a BA degree from Temple University. See full bio.

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Abby Shemesh

Abby is the co-founder and Chief Acquisitions Officer at Amerinote Xchange. He has been operating within the mortgage market for over a decade. Abby was featured on industry publications like Yahoo! Finance, MSN Money, Realtor.com, and GOBankingRates.com. See full bio.

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Mortgage Assignment Laws and Definition

(This may not be the same place you live)

  What is a Mortgage Assignment?

A mortgage is a legal agreement. Under this agreement, a bank or other lending institution provides a loan to an individual seeking to finance a home purchase. The lender is referred to as a creditor. The person who finances the home owes money to the bank, and is referred to as the debtor.

To make money, the bank charges interest on the loan. To ensure the debtor pays the loan, the bank takes a security interest in what the loan is financing — the home itself. If the buyer fails to pay the loan, the bank can take the property through a foreclosure proceeding.

There are two main documents involved in a mortgage agreement. The document setting the financial terms and conditions of repayment is known as the mortgage note. The bank is the owner of the note. The note is secured by the mortgage. This means if the debtor does not make payment on the note, the bank may foreclose on the home. 

The document describing the mortgaged property is called the mortgage agreement. In the mortgage agreement, the debtor agrees to make payments under the note, and agrees that if payment is not made, the bank may institute foreclosure proceedings and take the home as collateral .

An assignment of a mortgage refers to an assignment of the note and assignment of the mortgage agreement. Both the note and the mortgage can be assigned. To assign the note and mortgage is to transfer ownership of the note and mortgage. Once the note is assigned, the person to whom it is assigned, the assignee, can collect payment under the note. 

Assignment of the mortgage agreement occurs when the mortgagee (the bank or lender) transfers its rights under the agreement to another party. That party is referred to as the assignee, and receives the right to enforce the agreement’s terms against the assignor, or debtor (also called the “mortgagor”). 

What are the Requirements for Executing a Mortgage Assignment?

What are some of the benefits and drawbacks of mortgage assignments, are there any defenses to mortgage assignments, do i need to hire an attorney for help with a mortgage assignment.

For a mortgage to be validly assigned, the assignment document (the document formally assigning ownership from one person to another) must contain:

• The current assignor name.
• The name of the assignee.
• The current borrower or borrowers’ names. 
• A description of the mortgage, including date of execution of the mortgage agreement, the amount of the loan that remains, and a reference to where the mortgage was initially recorded. A mortgage is recorded in the office of a county clerk, in an index, typically bearing a volume or page number. The reference to where the mortgage was recorded should include the date of recording, volume, page number, and county of recording.
• A description of the property. The description must be a legal description that unambiguously and completely describes the boundaries of the property.

There are several types of assignments of mortgage. These include a corrective assignment of mortgage, a corporate assignment of mortgage, and a mers assignment of mortgage. A corrective assignment corrects or amends a defect or mistake in the original assignment. A corporate assignment is an assignment of the mortgage from one corporation to another. 

A mers assignment involves the Mortgage Electronic Registration System (MERS). Mortgages often designate MERS as a nominee (agent for) the lender. When the lender assigns a mortgage to MERS, MERS does not actually receive ownership of the note or mortgage agreement. Instead, MERS tracks the mortgage as the mortgage is assigned from bank to bank. 

An advantage of a mortgage assignment is that the assignment permits buyers interested in purchasing a home, to do so without having to obtain a loan from a financial institution. The buyer, through an assignment from the current homeowner, assumes the rights and responsibilities under the mortgage. 

A disadvantage of a mortgage assignment is the consequences of failing to record it. Under most state laws, an entity seeking to institute foreclosure proceedings must record the assignment before it can do so. If a mortgage is not recorded, the judge will dismiss the foreclosure proceeding. 

Failure to observe mortgage assignment procedure can be used as a defense by a homeowner in a foreclosure proceeding. Before a bank can institute a foreclosure proceeding, the bank must record the assignment of the note. The bank must also be in actual possession of the note. 

If the bank fails to “produce the note,” that is, cannot demonstrate that the note was assigned to it, the bank cannot demonstrate it owns the note. Therefore, it lacks legal standing to commence a foreclosure proceeding.

If you need help with preparing an assignment of mortgage, you should contact a mortgage lawyer . An experienced mortgage lawyer near you can assist you with preparing and recording the document.

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What Is Assignment of Mortgage: What You Need to Know

We will explore the idea of mortgage assignment in this thorough guide, going over its definition, steps involved, potential consequences, and more. So read on to learn more about this important facet of the real estate market, whether you’re a homeowner, a prospective buyer, or just inquisitive about mortgages.

What is Assignment of Mortgage?

The assignment of mortgage, often simply referred to as mortgage assignment , is a legal process that involves the transfer of a mortgage loan from one party to another. This transfer typically occurs between mortgage lenders or financial institutions and is a common practice within the mortgage industry.

The Key Parties Involved

• Assignor: The person transferring the mortgage is known as the assignor. The initial lender or financial organization that gave the borrower the mortgage loan is often the assignor.
• Assignee: The assignee is the party receiving the mortgage assignment. This could be another lender or financial institution that is buying the mortgage, often as part of a financial transaction.
• Borrower: The borrower is the individual or entity that initially took out the mortgage loan to finance the purchase of a property.

Why is Assignment of Mortgage Necessary?

Assignment of mortgage occurs for various reasons, and it serves specific purposes for all parties involved.

1. Loan Portfolio Management

Mortgage assignment is a common practice used by lenders to better manage their loan portfolios. Lenders might raise funds to offer more loans or issue new mortgages by selling or transferring mortgage loans to other financial organizations. This procedure aids in keeping their portfolios risk-balanced and liquid.

2. Risk Mitigation

Lenders may also assign mortgages to mitigate risk. When they transfer a mortgage to another entity, they are essentially transferring the associated risk as well. This can be a strategic move to reduce their exposure to potential defaults or financial instability.

3. Secondary Mortgage Market

The secondary mortgage market plays a significant role in the assignment of mortgages. Many mortgages are bundled together into mortgage-backed securities (MBS) and sold to investors. Assignment of mortgages allows lenders to participate in this market, which provides additional funding for new mortgage loans.

The Assignment of Mortgage Process

The process of assigning a mortgage, or deciding to sell your mortgage , involves several steps and legal requirements. Here’s a breakdown of the typical process:

1. Agreement between Parties

The assignor (original lender) and assignee (new lender or investor) must enter into a formal agreement outlining the terms and conditions of the new mortgage assignment. This agreement includes details such as the transfer price, terms of the loan, and any specific warranties or representations.

2. Notice to the Borrower

Once the agreement is in place, the borrower is typically notified of the assignment. This notice informs them that the servicing of their mortgage, including collecting monthly mortgage payments, will now be handled by the assignee. The borrower is advised to send future payments to the assignee.

3. Recordation

In many jurisdictions, mortgage assignments must be recorded with the appropriate government office, such as the county recorder’s office. This recordation provides public notice of the transfer and ensures that the assignee has a legal claim on the property.

4. Continuation of Monthly Mortgage Payments

For the borrower, the most noticeable change is the address where monthly payments are sent. Instead of sending payment to the original lender, the borrower will send them to the assignee. It is crucial for borrowers to keep records of these changes to avoid any confusion or missed payments.

Implications of Mortgage Assignment for Borrowers

While the assignment of mortgage primarily involves lenders and investors, it can have implications for borrowers as well. Here are some important considerations for borrowers:

1. No Change in Loan Terms

Borrowers should be aware that the assignment of mortgage does not change the terms of their loan. The interest rate, monthly payments, and other loan terms remain the same. The only change is the entity to which payments are made.

2. Proper Record-Keeping

Borrowers must maintain accurate records of their mortgage payments and correspondence related to the assignment. This helps ensure that payments are correctly credited and can be vital in case of any disputes or issues.

3. Communication with the New Lender

If borrowers have questions or concerns about their mortgage after the assignment, they should reach out to the new lender or servicer. Open and clear communication can help address any issues that may arise during the transition.

4. Property Taxes and Insurance

Borrowers are still responsible for property taxes and homeowner’s insurance, even after the assignment of mortgage. These payments are typically not affected by the transfer of the loan.

The Role of Mortgage Servicers

Mortgage servicers play a crucial role in the assignment of mortgage process. This section will explore the responsibilities of mortgage servicers, their relationship with borrowers, and how they manage mortgage loans on behalf of investors or lenders.

Legal Requirements and Regulations

Assignment is subject to various legal mortgage requirements and regulations that vary by jurisdiction. Discussing these legal aspects will help readers understand the legal framework governing the assignment of mortgages in their region and how it impacts the process.

Impact on Credit and Credit Reporting

The assignment of mortgage can have implications for borrowers’ credit reports and scores. Explore how mortgage assignment can affect credit histories, reporting by credit bureaus, and what borrowers can do to protect their credit during and after the assignment.

Assignment of Mortgage vs. Assumption of Mortgage

Differentiating between assignment of mortgage and assumption of mortgage is important. This section will explain the key differences, where one party takes over the mortgage and liability, while the other party merely transfers the loan to a new lender.

Impact on Property Taxes and Insurance

Taxes and insurance are essential components of homeownership. Explain how the assignment of mortgage may affect property tax payments and the homeowner’s insurance policy, as these are often escrowed into the monthly mortgage payment.

Potential Challenges and Disputes

Discuss common challenges or disputes that can arise during or after the assignment of mortgage, such as miscommunication, incorrect payment processing, or disputes over ownership rights. Offer advice on how to handle and resolve these issues.

Foreclosure and Default Scenarios

In the unfortunate event of mortgage default, understanding how the assignment of mortgage affects foreclosure proceedings is crucial. Explain how the assignee handles foreclosures and what options are available to borrowers facing financial difficulties.

Future Trends and Innovations

Explore emerging trends and innovations in the mortgage industry related to the assignment of mortgages. This could include the use of blockchain technology, digital mortgages, or other advancements that may impact the process.

In the complex world of real estate and mortgage financing , the assignment of mortgage plays a pivotal role in the movement of funds and management of risk. It allows lenders to efficiently manage their portfolios, mitigate risk, and participate in the secondary mortgage market. For borrowers, understanding the process and implications of mortgage assignment is essential to ensure the smooth continuation of their monthly mortgage payments.

As you navigate the world of homeownership or consider entering it, remember that the assignment of mortgage is a routine occurrence designed to benefit all parties involved. By staying informed and maintaining open communication with your lender or servicer, you can ensure that your mortgage loan remains a manageable and secure financial commitment.

In summary, purchase of mortgage is a vital mechanism within the mortgage industry that facilitates the transfer of mortgage loans from one party to another. This process helps lenders manage their portfolios, mitigate risk, and participate in the secondary mortgage market.

For borrowers, it means a change in the entity collecting their monthly mortgage payments but typically does not alter the terms of the original loan. Keeping accurate records and staying informed about the transition are crucial steps to ensure a smooth experience for homeowners. So, whether you’re a homeowner, lender, or investor, understanding assignment of mortgage is key to navigating the real estate landscape effectively.

This article is for informational purposes only and does not constitute legal, tax, or accounting advice.

Written by Alan Noblitt

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What Is a Transfer of Mortgage?

How a transfer of mortgage works, special considerations for transfer of mortgage, the bottom line.

• Personal Finance

Transfer of Mortgage: What it Is and How it Works

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

Transfer of mortgage is a transaction where either the borrower or lender assigns an existing mortgage (a loan to purchase a property—usually a residential one—using the property as collateral) from the current holder to another person or entity.

Homeowners who are unable to keep current on their mortgage payments may seek a transfer so that they do not default and go into foreclosure. However, not every mortgage is transferable . Here's how a transfer of mortgage works, and how to tell if your mortgage allows this strategy.

key takeaways

• A transfer of mortgage is the reassignment of an existing mortgage from the current holder to another person or entity.
• Not all mortgages can be transferred to another person.
• If a mortgage can be transferred, the lender has the right to approve the person assuming the loan.
• Many mortgage lenders often include a due-on-sale clause in their loans that prohibits a home seller transferring a mortgage to a buyer.

A transfer of mortgage lets a buyer take over the current homeowner's mortgage, assuming the same terms and conditions as they take over responsibility for payments. If your mortgage allows it, this strategy can help you avoid foreclosure, but it can have advantages for the new mortgage owner as well.

For one, the new mortgage owner may want to take on an older mortgage because such a transfer could let them take advantage of previous interest rates if they are lower than the current market rates. Although the new mortgage owner may have to undergo a credit check by the lender.

A transfer of the mortgage, if completed successfully without challenge or stipulations, would not change the terms or length of the loan. The new mortgage owner would only be responsible for the remaining outstanding balance. Through a transfer of the mortgage, a buyer might also avoid having to pay closing costs associated with a new mortgage.

Many mortgages are not eligible for transfer . Mortgages that are eligible are considered "assumable." In order to transfer a mortgage, the mortgage lender will typically need to verify that the person or entity that will assume the loan has adequate income and credit history to be able to make payments in a timely manner.

If you are not allowed to transfer a mortgage due to the loan's underwriting, you may need to explore other options to avoid foreclosure . For example, you could work with your lender to see if they will agree to other payment arrangements, such as a temporary suspension of your payment obligation.

Another option to avoid foreclosure is to sell the home and have a potential buyer, colleague, family member, or another entity agree to make up any difference between the home's sale price and the unpaid loan balance.

Lenders who want to deter a transfer of mortgage might include a clause in the mortgage that requires the remaining balance of the loan to be due on the sale of the property.

This due on sale clause ensures that when homeowners sell their houses, they cannot transfer the mortgage to the buyer (which could play a key part in a homebuyer's making an offer, especially if the mortgage interest was lower than the current market rates). These clauses in effect require the seller to repay the full outstanding balance on the loan, perhaps with the sale proceeds, and likewise compel the buyer to take out a new mortgage to make the purchase.

Under the 1982 Garn-St. Germain Act , lenders cannot enforce the due-on-sale clause in certain situations even if ownership has changed.

You can potentially avoid triggering a due-on-sale clause by transferring the mortgage to an immediate family member, or to a spouse from whom one is legally separated or divorced.

Further, the transfer may be a result of an inheritance following the death of the borrower, and the family member is moving into the home. In such an instance, the lender might not have grounds to prevent the transfer of the mortgage. If the property is transferred to a living trust and the borrower is the trust’s beneficiary , the mortgage usually can also be transferred as well.

Can You Add a Co-Borrower to Your Mortgage?

Once you have a mortgage on your own, you cannot add a co-borrower without refinancing the loan. Many mortgage lenders allow co-borrowers, but some may not. The requirements for a home loan will vary by lender.

What Types of Mortgages are Assumable Mortgages?

Assumable mortgages that can be transferred to another person or entity may include Federal Housing Authority (FHA) loans, U.S. Department of Agriculture (USDA) loans, and Veterans Affairs (VA) loans. Conventional mortgages backed by Freddie Mac or Fannie Mae are generally not assumable.

What Is an Unofficial Transfer?

An unofficial transfer is not a legal arrangement. In this case, the original homeowner continues to make payments to their mortgage lender, but they receive payments from another party to help them make the payments.

Whether you can transfer a mortgage to another party will depend on what type of mortgage you have and the lender's standards. Most conventional mortgages backed by Fannie Mae and Freddie Mac are not eligible for mortgage transfers. Before you go forward with this strategy of avoiding foreclosure, consider alternatives such as working with your lender or requesting forbearance.

U.S. Department of Housing and Urban Development. " Assumptions ."

Congress.gov. " H.R.6267 - Garn-St. Germain Depository Institutions Act of 1982 ."

United States Department of Agriculture. " Chapter 2 - Overview of Section 502 ."

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What Is An Assignment of Mortgage?

A mortgage assignment is the legal, recorded document showing the transfer of a mortgage from one lender to another. This transfer includes all rights and obligations associated with the mortgage; collecting payments and enforcing loan terms. 

Assignor (original lender) and Assignee (new lender) are the parties involved. This will often arise over the course of a long term mortgage that remains unsatisfied due to the sale of the loan or a loan servicing transfer. Typically law requires notification to the mortgagee (borrower) of the assignment. 

Loan terms do not change due to assignment, and payment terms remain as originally agreed. 

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What is an assignment of mortgage?

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Understanding How Assignments of Mortgage Work

The bank or other mortgage lender that provides a borrower with the funds to purchase a home often later transfers or assigns its interest in the mortgage to another firm. When this happens, the borrower will start sending monthly mortgage payments to the new owner of the mortgage instead of the original lender. Some other things, such as the available modes of payment, many also change.  However, the general terms of the mortgage, such as the interest rate and payment amounts, will stay the same.

If you need help with a mortgage, consider finding a financial advisor to work with .

Mortgage Assignment Basics

Mortgages are assigned using a document called an assignment of mortgage. This legally transfers the original lender’s interest in the loan to the new company. After doing this, the original lender will no longer receive the payments of principal and interest. However, by assigning the loan the mortgage company will free up capital. This allows the original lender to make more loans and generate additional origination and other fees.

At closing, borrowers sign a document granting the original lender the right to assign the mortgage elsewhere. This means the original lender doesn’t have to ask for permission to assign the mortgage but can do so whenever it wants to. Often this occurs within a few months after the closing, but it can happen at any time during the term of a mortgage. Once a loan has been assigned, it can be assigned again.

The assignment of mortgage document uses several pieces of information to accurately identify the specific mortgage that is being transferred. These generally include:

The name of the borrower

The date of the mortgage

The jurisdiction where it was recorded

The amount of money that was originally loaned

A legal description of the home or other property used as collateral to secure the loan.

Although a lender doesn’t need to request the borrower’s permission before assigning a mortgage, the lender does have to notify the borrower after the mortgage has been assigned. This notice will generally provide the new lender’s name, contact information and mailing address or other information need to make payments.

Effects of Mortgage Assignment

When a mortgage is assigned, the original terms of the mortgage remain unchanged. The monthly principal and interest, interest rate and total number of payments required to pay the loan off will be the same as on the mortgage when it was signed at closing.

A company assigned a mortgage may have different methods of accepting monthly payments, such as online payments, paper checks or money orders. A borrower who wants more payment methods may be able to get a new mortgage holder to provide them upon request.

Some things may change, however. For instance, the new owner of the mortgage may have a different method of handling escrow payments that are used to pay property taxes and the premiums for hazard insurance. The law requires mortgage companies to charge no more than one-twelfth the annual cost of property taxes and insurance each month. However, they can also require borrowers to maintain a cushion of up to one-sixth the annual total required to pay taxes and insurance. If a new mortgage company has a different policy on this cushion, it could change the total monthly payment.

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The borrower also does not need to notify the local taxing authorities or the hazard insurance provider about the assignment. The new holder of the mortgage is required to handle these notifications.

Borrowers should check the information about where payments are supposed to go. This need to be accurate so payments will be directed correctly to the holder of the mortgage and the borrower will receive credit for them.

Another important matter that may change when a loan is assigned is the procedure the mortgage company will follow in the event of default. Borrowers should make themselves familiar with the notification methods used by the new mortgage to let them know if payments are not being received and foreclosure is in the offing.

The Bottom Line

Home mortgages are often assigned by their original lenders to other companies. Assignment usually doesn’t change much for the borrower, except that the payments will go to a different address. The original loan amount, interest payment, term and monthly principal and interest part of the payment will stay the same. Assigning mortgages frees up money for the lenders to make more loans. Borrowers don’t have to be told a mortgage will be assigned, since they agree to this at closing. However, they must be notified after an assignment and told how to contact the new mortgage holder.

Mortgage Tips

A financial advisor can help you evaluate home buying and other important financial moves. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now .

Borrowers can find out whether and where their mortgage has been assigned through the Mortgage Electronic Registration Systems (MERS). This is an organization created by mortgage companies to track mortgage assignments. Borrowers can use a free online service provided by MERS to find out who owns their mortgage.

Mortgage rates are more volatile than they have been in a long time. Check out SmartAsset’s mortgage rates table to get a better idea of what the market looks like right now.

Photo credit: ©iStock.com/ArLawKa AungTun, ©iStock.com/ridvan_celik, ©iStock.com/damircudic

The post Understanding How Assignments of Mortgage Work appeared first on SmartAsset Blog .

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