I'm buying a 1st NPN via FCI Exchange. What is the difference between Full Original Chain VS Full Recorded Chain and how should I consider this in to the purchase?
Hi Bret - Ownership of mortgage loans are transferred using an assignment of mortgage (or deed of trust). Each assignment should be recorded, but this is not always done in a timely fashion, especially when someone purchases a note and sells it to someone else in a short period of time. In this case, the complete chain of lien ownership includes the unrecorded assignments, and the recorded chain does not. I am not familiar with the term "Full Original Chain", but I suspect it is a reference to the complete chain whether recorded or not, i.e., the hard-copy assignment documents.
As part of the closing process, FCI should validate that the hard-copy collateral file provided by the seller includes a complete chain of original assignments, ending with the current seller. They will also produce a new assignment which conveys ownership of the lien from the seller to you (or your business entity), and ship the collateral file to you. When you receive the collateral file, you will need to get an O&E report (title search) to check how much of the chain is recorded and then take steps to record any dry (unrecorded) assignments. I believe FCI can also do the recording for you as an additional service if you wish.
Hope that helps.
Excellent, thank you for your insight on the chain assignments for notes, Mike Hartzog. That was exactly what I wanted to know. I just wanted to make sure there wasn't some sort of "Gotcha, you are SOL" moment that once i closed the sale I was on my own.
In addition to what @Mike Hartzog posted, a loan that was in the MERS system may have undergone a number of assignments within MERS that might not be recorded at the county.
Mike made some excellent points.
Also you will need to know when the note was created (date) and the last payment received from whoever sold you the note as well as the balance owed. This should be a part of the collateral file and many times is not. Make sure you have all the Allonges.
If you ask FCI for any assistance don't be suprised if they tell you that they are only providing a platform for buyer and seller and that you have to go to the seller for information. In their fine print it says you are responsible for getting all information from the seller before finalizing the deal.
I have had to cancel 3 transactions with FCI because the seller did not have a complate file and was unable to get the necessary documents.
Make sure you get a title search before purchasing. There are numerious notes on FCI where the property has been sold and the lister never took the listing down.
Yea, I have to chime in here . FCI does NOT confirm the validity of an assignment chain. Do NOT rely on them. Purchasing a lien prior to reconciling all assignments have been perfected is a poor purchase decision. Ultimately, never do that. Verify chain first, buy second. These trades do not carry buyback provisions. All due dilligence should be conducted prior to settlement not post settlement.
There is tons and tons of confusion from folks on assignments and endorsements. There is even more misunderstandings when MERs is involved.
The easy answer is all chains should resolve from the Originator to your Seller. MERs can be assigned as a function of the instrument or post origination. MERs needs an assignment out of them. Lately, I have seen unresolved MERs interests in a lot of assets. If MERs is unresolved, you should just get an AOM from them to you in order to re-bundle the interest they were granted. Assignments behind the MERs curtain are not concerning but endorsements are.
In many states possession will be the golden rule for ownership and enforcement. That is not to say that it does not get challenged and those challenges can lead to issues with enforcement and collections.
As Mike mentions the terms used in the OP are not standard terms. The interpretation he states does seem to make sense but I always cringe when folks are using improper terms for defined things. The chain is the chain. It is either perfected (recorded) or not. "Original" would tend to mean origination which there is only one Mortgagee, the lender. So the "Full Original Chain" by technical definition would really only mean the original lender in the instrument. If you have some other meaning that you believe to attach to those two phrases, you can share those so we can help correct your understanding and term use.
Excellent kernels of knowledge. I am just starting in this avenue of 1st NPNs via a "platform" and after @Dion DePaoli mentioned "FCI does NOT confirm the validity of an assignment chain. Do NOT rely on them" I got sick to my stomach but I think I am good. Let me clarify, I show on the title search i ran prior to bidding on the note(to look for liens) that it does show was transferred from the Original to the seller of whom I am buying from. When cross referencing the allonges and assignments it confirms what was on the title search. Excuse me if I am using terms and concepts incorrectly, hopefully I won't loose anything on this one AFTER THE FACT. Below is the dialogue:
Original Collateral File has been received and reviewed by Admin. A Color Copy of which has been uploaded to Step 10 of this Transaction. Buyer, Please review and confirm for Closing as soon as possible. Confirm both by completing Step 10 and sending a message of approval to Close within this Chat Section.
Buyer and Seller, Also, as a part of our review we noticed that the full chain of assignments from originating lender to Homesave was not provided in the file. Can the Seller please update as to the status of the original chain of assignments.
Thanks. I'll review and await about chain
under review , can we move forward without chain
Buyer, let us know if we can move forward without chain.
Seller, can you provide full chain of recorded copies of the chain of assignments. This may assist the Buyer with moving forward.
We will need full chain
added o&e to show recorded chain
Buyer, are you saying that full original chain is required, or is full recorded chain acceptable? I just want to make sure that we are accurate in terms of making sure the Seller knows.
full recorded will suffice
seller, do you happen yo have a credit report ?
Only the O and E hs been provided this far. Seller, are copies at least available at this time?
we only have copies
Seller, please upload all copies of assignments so that we can get final approval from the buyer to close at this time.
attached is everything the investor has provided us
I agree that it is ultimately up to the buyer to verify chain of title, but as Bret shows, FCIExchange does intervene to make sure that both parties are clear as to what is expected and what is provided. I've found their level of service very professional and mostly thorough.
Not sure what you are really looking to get answers on in the last post. Assignments and Endorsements tend to be very confusing for newbies (and admins).
Does a Seller need to have original versions of an Assignment? No.
In fact, a Seller need not even supply or provide said assignments if they are in public record. They are in public record. The utility of the instrument is expired upon recording. If you want a copy either print it from public record or print it from the back of your O&E Report. My 'copy' is the same as your 'copy' - neither have a utility both are copies of the same thing.
It sounds like Admin was asking above for copies of the AOMs due to a lack of uploading not a function of reconcilation. The Seller responded with an O&E showing the instruments of record. That satisfies all requests for the item. (Well, it should have anyway) I would have done similar. Everything after the point were the parties have looked at an O&E and seen the recorded AOM's (which again the O&E report should have a copy in it as well) is kicking a horse that has already ran the race.
What we seem to have here is a confusion around what needs to be an "Original Document" and what does not. A pretty common misunderstanding. As you can see, it seems to even confuse the Admin. The confusion is both stalling the trade and confusing the Seller.
The rule of thumb, any unrecorded instrument which includes the actual security instrument (mortgage/dot), assignment or modification agreement needs to be an original document. ONLY IF it is NOT of record. Because it takes an original to record and prefect the instrument and interests. If those specific instruments are recorded, an original is not needed. Nice to have but not a problem if they are not included.
The Promissory Note along with all endorsements needs to be an Original Document with wet ink signatures. There are ways around this requirement as well. Information for another time.
To be clear, the Admin is reviewing things and is not really reconciling the chain as much as they are simply asking for copies to be posted. The actions are not a validation nor claim of defect of the chain. There seems to be confusion on the actions taken by Admin as being a chain validation or reconciliation. The admin is pointing out the copies are not uploaded. "Review" is an operable word and does not mean Admin or FCI pulled an O&E on their own dime and reconciled the chain for you. That seems evidenced by the Admin not really responding to the utility of the O&E Report supplied by the Seller. Fundamentally the Admin is simply trying to get the deal to settle. I would not impute any other action above that idea on to him or her. Admin is not checking the chain, just looking for items that they believed should be uploaded. Likely reality, Admin is simply trying to get the deal to settle and that is all they are 'really' worried about. Let's not confuse that with something else.
If you are new and not certain about your assignment chain I would pay the $75 to have a company like Richmond Monroe review it. I have not used them personally but they have been recommended to me in the past, I am sure there are other companies doing the same thing.
I have no business relation ship with them.
In the past I have had sellers on FCI try and sell me notes with missing paperwork. If the note is missing paperwork companies like this can, for a fee, trace it and try to get missing documents. If there are any issues make the seller fix them on their dime prior to purchase.
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