Chain of Assignments: A Fundamental of the Note Business

There are many nuances to note buying and handling mortgages in this emerging industry. In addition to buying the actual notes, other steps are involved such as short sales, foreclosure, collateral, reform laws, analyzing notes, equity, fundraising, workouts, etc. Therefore as a note buyer, become knowledgeable and skillful at these elements and practices. One of the very basics you will have to familiarize yourself with as a note buyer is recording mortgage assignments. You can either record the assignments yourself or transfer ownership using MERS, which we’ll discuss briefly.

Your process will first begin by making a purchase and signing the contract, which will spell out the details of your acquisition. Once that’s completed, proceed to handling the collateral received and scanning all documents into your note management software/files on your computer. Take time revising the documents, making sure there is a clear chain of mortgage assignments. This chain is a list displaying transfers of the mortgage beginning with the loan originator to the entity who currently owns the mortgage. In the event that the assignment chain is broken, go back to the company from which the note just purchased from and try to seek remedies. Assignments should always be in order, showing clear transfer from original owner to the current owner.

Your company can either record assignments or use the MERS system to transfer ownership of assets. What is MERS? MERS stands for Mortgage Electronic Registration System, Inc., and is a company, created by the mortgage banking industry, that maintains a database that tracks mortgages for its members so that they don’t have to record assignments every time that a mortgage gets transferred from one bank or company to the next. About 60% of mortgages are in MERS and most members are big banks that use it to save on recording fees. Having a mortgage in MERs can be very useful because it facilitates the things, eliminating the long-standing process. However, keep in mind that if you initiate a foreclosure on that mortgage it is advised to take it out of MERS; the attorney will find it best for the assignment to be recorded under the current owners’ name to process the foreclosure.