When you take out a loan to purchase a home, you are required to sign two documents: a promissory note and a mortgage (or deed of trust).
Assignments and endorsements are the ways that these documents are transferred between banks.
) When a loan changes hands, the promissory note is endorsed (signed over) to the new owner of the loan.
In some cases, the note is endorsed in blank which makes it a bearer instrument under Article 3 of the Uniform Commercial Code.
The purpose of the mortgage (or deed of trust) is to provide security for the loan that is evidenced by a promissory note.
(Learn about the difference between a mortgage and a deed of trust.) Loan Transfers.In a typical transaction, when the mortgagee sells the debt to another bank, an assignment is recorded and the promissory note is endorsed (signed over) to the new bank.These documents are separate and each has its own distinct set of rules that govern how they are exchanged between banks.The right or benefit being assigned may be a gift (such as a waiver) or it may be paid for with a contractual consideration such as money.The rights may be vested or contingent, Mortgages and loans are relatively straightforward and amenable to assignment.These loans are referred to as MERS as Original Mortgagee (MOM) loans.In other cases, the loan may be assigned to MERS (solely as a nominee for the lender) at some point later in its life cycle after the loan closes.Banks often sell and buy mortgages from each other.An “assignment” is the document that is the legal record of this transfer from one mortgagee to another.This means that any party that possesses the note has the legal authority to enforce it.Assignments and endorsements prove which party owns the debt and therefore may bring the foreclosure action.