Mortgage lenders frequently buy and sell mortgage loans to an from one another. Although these transactions have little practical effect on borrowers, the legal technicalities can appear overwhelming. Most mortgage lenders in California secure the mortgage loan with a deed of trust. An assignment of deed of trust allows that lender to sell the loan to a different lender.
A deed of trust is the legal document that gives your mortgage lender a lien on your property. The deed of trust authorizes your lender to foreclose and sell your home if you don't make your mortgage payments on time. California lenders can choose to use either a mortgage or a deed of trust, and most use a deed of trust because foreclosure is easier under the deed of trust then under a mortgage.
When your mortgage lender decides he wants to sell your mortgage loan to another lender, your mortgage lender will sign an assignment of deed of trust in favor of the new lender. This assignment gives the new lender the same lien on your property that your original lender had under the mortgage loan. The new lender essentially steps into the shoes of the old lender.
Your mortgage lender can sell your mortgage and provide an assignment of deed of trust any time before you pay off your mortgage loan. It is not uncommon for a 30-year mortgage loan to transfer to five or more different lenders over the life of the loan.
An assignment of deed of trust has very little effect on the mortgage borrower. The borrower will need to make her mortgage payments to the new lender, but that is the only change the borrower will notice. So, the borrower may have to send checks to a new address, or sign up for automatic payments on the new lender's website, but other than that, the mortgage loan remains exactly as it was before the assignment.
The freedom for mortgage lenders to buy and sell mortgages to one another is a big reason lenders are able to offer low mortgage interest rates. The freedom to assign the mortgage at any time reduces the lender's risk because the lender can sell the mortgage and raise capital anytime he is short on cash. Do not get worried or frustrated if your lender assigns your mortgage to a new lender.
- "Real Estate Finance Law"; Grant S. Nelson and Dale A. Whitman; 2008
About the Author
The Constitution Guru has worked as a writer and editor for "BYU Law Review" and "BYU Journal of Public Law." He is an experienced attorney with a law degree and a B.A. degree in history with an emphasis on U.S. Constitutional history, both earned at Brigham Young University.
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