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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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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.

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

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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Demystifying mortgage assignment: what it means for borrowers and lenders, demystifying mortgage assignment: what it means for borrowers and lenders. explore the process, benefits, and risks in our comprehensive guide..

A mortgage assignment is a financial process in which an existing mortgage is transferred from the current holder to another party. It can occur for various reasons, such as a lender selling the mortgage to another bank or financial institution.

Understanding mortgage assignment is essential for both borrowers and lenders, as it impacts the terms and the handling of the loan.

This brief introduction lays the groundwork for a deeper understanding of what mortgage assignment entails and its significance in the mortgage industry.

Understanding Mortgage Assignment

Mortgage assignment is when the original lender transfers the mortgage to another lender or financial institution. This can occur for various reasons, including the original lender wanting to liquidate assets or reduce risk exposure.

Steps in the Mortgage Assignment Process

Discover the critical steps in the mortgage assignment process, from initiation to completion, ensuring a smooth transfer between lenders and maintaining clarity for borrowers.

The process begins when the original lender assigns the mortgage to another party. This decision can be driven by a strategic need to manage financial resources more effectively.

The original and the new lender agree on the terms of the assignment. This agreement includes details about the transfer of rights and the responsibilities each party will hold.

Notification

The borrower is informed about the mortgage assignment. Borrowers must receive clear and concise information about what this change means for their mortgage terms.

Legal Documentation

The transfer of a mortgage is formalized through legal documents. These documents are critical as they protect the rights of all parties involved, ensuring the assignment adheres to financial regulations.

The mortgage assignment is complete once all parties have signed the legal documents and all conditions are met. The new lender now holds the rights and duties originally held by the original lender.

Critical Points for Borrowers and Lenders

Borrowers should pay attention to any changes in the terms of their mortgage, and both lenders need to handle the legal aspects carefully to prevent future disputes. Proper communication between all parties can smooth the transition and maintain trust.

Mortgage assignment doesn't have to be a complicated affair. Clear communication and adherence to legal procedures can be a straightforward process beneficial to all involved.

Advantages of Mortgage Assignment for Lenders and Borrowers

Mortgage assignment offers significant benefits for both lenders and borrowers, each finding unique advantages in the process. Understanding these benefits can help parties make informed decisions about their mortgage management strategies.

For Lenders

Mortgage assignment allows lenders to free up capital and reduce risk by transferring the mortgage to another party, optimizing their financial assets efficiently.

Freeing Up Capital

One of the primary advantages for lenders in the process of mortgage assignment is the ability to free up capital.

By transferring the rights of a mortgage to another financial institution or entity, the original lender can redeploy resources into new lending opportunities or other investments. This can improve the lender's liquidity and enhance its financial flexibility.

Reducing Risk

Mortgage assignment also allows lenders to reduce their risk exposure. When a mortgage is transferred, the associated risks, such as the possibility of default, are also transferred to the acquiring party.

This shift can help the original lender manage its risk portfolio more effectively, allowing for a more stable financial position.

For Borrowers

For borrowers, mortgage assignment can lead to better loan terms and ensure the continuity of their mortgage agreement with a new lender.

Potential for Better Terms

For borrowers, one of the critical advantages of mortgage assignment is the potential to secure better terms from a new lender. This new lender may offer lower interest rates, better repayment conditions, or more favorable terms to attract and maintain clients.

As a result, borrowers can enjoy cost savings and a loan structure more aligned with their current financial situation.

Continuity of Agreement

Despite the change in the lender, mortgage assignment ensures that the continuity of the mortgage agreement is maintained. This means that borrowers do not have to renegotiate the fundamental terms of their mortgage.

Their payment schedule, interest rate, and loan duration remain the same, providing them stability and predictability in their financial planning.

Potential Risks and Disadvantages of Mortgage Assignment

Mortgage assignment can be a valuable tool for managing financial portfolios for borrowers and lenders.

However, it comes with certain risks and disadvantages that must be considered. This section outlines some challenges, helping both parties make informed decisions.

In the mortgage assignment process, lenders face significant challenges, including legal complexities and managing borrower expectations, which require careful navigation to avoid disputes and dissatisfaction.

Legal Complexities and Potential Disputes

One of the primary concerns for lenders in the process of mortgage assignment is the array of legal complexities that can arise.

Transferring a mortgage from one lender to another involves meticulous documentation and strict adherence to legal standards, which, if not properly managed, can lead to disputes with borrowers. These disputes may revolve around misunderstandings about the mortgage terms or the new lender's responsibilities.

Challenges in Managing Borrower Expectations

Lenders may also face challenges in managing borrower expectations during a mortgage assignment. Borrowers might not fully understand the implications of their mortgage being assigned to another lender, which can lead to dissatisfaction or conflict.

Lenders must clearly and effectively communicate what a mortgage assignment means and how it will affect the borrower's loan terms and conditions.

This section examines borrowers' challenges during mortgage assignments, focusing on potential changes regarding the risks of engaging with a new lending institution.

Possible Changes in Mortgage Terms

For borrowers, one of the significant risks associated with mortgage assignment is the potential for changes in the terms of their mortgage.

When a new lender takes over a mortgage, they might adjust the interest rates, payment schedules, or other terms to align with their lending policies. Such changes can sometimes be unfavorable to borrowers, increasing their financial burden.

Risks of Dealing with a New Lending Institution

Additionally, borrowers face risks related to the reputation and stability of the new lending institution. If the new lender has less favorable customer service or a weaker financial position, it could impact the borrower's experience and mortgage security.

Borrowers must thoroughly research the new lender and ensure they are comfortable with their practices and stability.

Considering Mortgage Assignment? Fetch Your Rate Today

As we conclude our discussion on mortgage assignment, it's clear that borrowers and lenders can benefit from this process when managed effectively.

Whether you're a lender looking to reorganize your portfolio or a borrower facing a change in the lender, understanding the terms and conditions of mortgage assignment is critical.

If you're contemplating a mortgage assignment, now is the time to contact Fetch arate and see how this option might work.

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Promissory Notes, Mortgage Assignments, and MERS’ Role in Real Estate

After the fall out of the subprime mortgage crisis that triggered the Great Recession, the effects still linger when looking at homeownership statistics in the United States. Nearly 10 million homeowners lost their homes to foreclosure between 2006 and 2014. Damaged credit and traumatized psyches paired with stricter lending standards and soaring median home prices mean that some former homeowners will never own another home.

Today, the United States is seeing the highest rates of unemployment since the Great Depression at nearly 15%  due to the COVID-19 pandemic, and of those who still own a home, nearly 4.1 million borrowers are struggling to make their monthly payments. Many are turning to forbearance for momentary relief from their mortgages.

For many homeowners, the question of what happens to their mortgage after closing day might not ever come up. Until the threat of foreclosure or the need for forbearance arises, most borrowers simply send in their monthly payments with no questions asked.

Now is a good time to consider the process after closing, and how it affects their property rights. Here are some of the questions to ask.

What happens after a real estate closing?

• At closing, the borrower signs the mortgage, the deed, and the promissory note
• The mortgage and the deed are recorded in the public record
• The promissory note is held by the lender while the loan is outstanding
• Payments are sent to the mortgage servicing company
• The mortgage may be securitized and sold to investors
• The mortgage may be transferred to another bank
• The mortgage servicing rights may change to another company
• When the mortgage is paid in full, a mortgage lien release or satisfaction with a number referencing the original mortgage loan is recorded in the public record to show the debt is no longer outstanding
• The promissory note is marked as paid in full and returned to the borrower

Banks often sell and buy mortgages from each other as a way to liquidate assets and improve their credit ratings. When the original lender sells the debt to another bank or an investor, a mortgage assignment is created and recorded in the public record and the promissory note is endorsed.

What are Loan Transfer Documents?

Assignments and endorsements prove who owns the debt and subsequently who has the authority to bring foreclosure action.

Mortgage Assignments

A Mortgage Assignment is a document showing a mortgage loan has been transferred from the originator to a third party.

Note Endorsements

In addition to the assignment, the originator of the loan or the most recent holder of the loan must endorse (or sign over) the promissory note whenever the loan changes hands. Sometimes, the note is endorsed “in blank,” which means that any party that possesses the note has the legal authority to enforce it.

While these documents are supposed to be recorded in the public land records systems, sometimes there’s a “break” in the chain. A missing mortgage satisfaction or assignment can cause a huge headache for homeowners when they go to sell. Without knowing who the official mortgage lienholder of the property is, the home can’t be sold. The title agent in charge of the closing is tasked with fixing the issue so that clear ownership rights can be established and the final mortgage payoff can be sent to the right lender if needed.

What is Mortgage Securitization?

In the last 30 years or so, the buying and selling of mortgage loans between lenders, banks, and investors has grown more complicated. When a mortgage is turned into a security, it’s pooled with similar types of loans and sold on the secondary mortgage market. The purchasers or investors in these securities receive interest in principal payments.

Securitization is good for lenders because it allows them to sell mortgage loans from their books and use that money to make more loans.

Where securitization goes wrong, as we saw during the housing crisis, is when bad or “toxic” assets are pooled together and sold on the secondary market to unsuspecting investors. Subprime mortgage-backed securities had received high ratings from credit agencies and offered a higher interest rate, but they also were the first to hemorrhage losses when borrowers began defaulting on homes with underwater mortgages.

Securitization isn’t an inherently good or bad process, it’s simply a mechanism by which banks liquidize assets, increase their credit and ratings, and clear their balance sheets.

For homeowners, securitization means that the mortgage isn’t owned by a single lender and is instead part of a pool of mortgages owned by investors. A mortgage service company is responsible for collecting the mortgage payments and sending it to the proper investors. Securitization also means that tracking the note and who has the authority to enforce it can get messy.

What is the Mortgage Electronic Registration System, Inc. or MERS?

The MERS system is a private, third-party database system used to track servicing rights and ownership of mortgages in the United States. This system of registering the promissory note and mortgage was created to make transferring these documents easier on the secondary mortgage market.

How does MERS work?

For some real estate transactions, the mortgage originator will designate MERS as the mortgagee at closing. These loans are called MERS as Original Mortgagee (MOM) loans. When buying a home, a borrower should see clear language on the mortgage or deed of trust document granting and conveying legal title of the mortgage to MERS as mortgagee. This gives the company the right to act on behalf of the current and subsequent owners of the loan.

In other transactions, the loan may be assigned to MERS in the public record at a later date after closing.

After MERS is designated as a nominee to act on behalf of the lender, it tracks the transfers of the loans between parties and acts as a nominee for each holder. This eliminates the need to file separate assignments in the public record each time the loan is transferred. If a lender sells the loan, MERS will update this information in their system.

Even though MERS is designated as the mortgagee, it doesn’t own the debt or hold the promissory note. MERS doesn’t service mortgages or collect payments on mortgages.

Benefits of MERS

Some of the benefits of the MERS system include:

• No document drafting fees
• Eliminates the need for multiple assignments each time the loan changes hands
• Reduces recording costs
• Saves time and administrative costs for lenders and servicers
• Provides the identification of servicers and investors for free for homeowners and lenders
• Used by Lenders to find undisclosed liens
• Used by municipalities to find companies responsible for maintaining vacant and abandoned properties
• Mortgage Identification Numbers (MIN) are assigned to each loan for easy tracking
• Selling of loans and servicing transfers are more efficient in the secondary market
• Obtaining lien releases when a lender goes out of business is simplified
• Cost savings by the mortgage industry is theoretically passed on to homeowners

Does MERS really save consumers money?

The MERS system is not meant to act as a replacement for public land records. However, some states, including Kentucky, New York, Texas, Alabama, and Delaware have sued the company that controls MERS for lost revenue from missing record filing fees. In the case of Kentucky , the state alleged that MERS did not record mortgage assignments with Kentucky County Clerks as they were transferred between banks. At $12 a recording, all those transfers without corresponding mortgage assignments add up to big bucks.

Despite numerous lawsuits challenging MERS over its mortgage assignment authority, the company that controls MERS usually receives favorable judgments . In 2016, courts in Texas ruled that MERS’ mortgage assignments were valid and dismissed two cases. County recorders in Pennsylvania also brought cases claiming that MERS and MERS System members failed to record mortgage assignments when transferring promissory notes, a violation of Pennsylvania recording laws. MERS emerged as the winner of these lawsuits as well.

Kentucky and other states argue that skipping out on these fees hurt the consumers and taxpayers in their states.

What is MERS role in foreclosures?

Depending on the state, a foreclosure process might be either judicial (reviewed by a judge in court) or nonjudicial. In the past, MERS, acting on behalf of lenders, has been named as the plaintiff in foreclosure proceedings. Sometimes MERS was even listed as the beneficiary in nonjudicial notices.

Whether or not MERS has the authority to file foreclosure as either the plaintiff or beneficiary is hotly contested. Some states have ruled that MERS doesn’t have standing to foreclose since it doesn’t have any financial interest in either the property of the promissory note.

MERS Splits the note and the mortgage

A court case from 1872, Carpenter v. Longan , established that where the promissory note goes, a deed of trust or mortgage must follow and, according to the United State’s Uniform Commercial Code (UCC) , the promissory note must also have a clear chain of title.

Foreclosure proceedings during the Great Recession proved to be complicated by the MERS system. Within the MERS system, a note and mortgage may be transferred multiple times, so to avoid an endorsement each time, the note is “endorsed in blank.” In one foreclosure after the other, borrowers were able to demonstrate that the subsequent assignments of the promissory note had gone unendorsed.

Although the MERS systems has helped the mortgage industry, title agents, and even borrowers better manage and understand who has the servicing rights and holds the authority to foreclose, several borrowers facing foreclosure have argued that the system impermissibly “splits” the note and the mortgage between the note holder and MERS as the beneficiary of the deed of trust or mortgage.

This process of bifurcation, it’s claimed, causes the relationship between the mortgage and note to become defective and subsequently unenforceable.

Homeowners facing foreclosure, especially in the aftermath of the housing bubble burst of 2008, were successful in delaying or avoiding foreclosure by arguing that the authority to foreclose was not satisfactorily established due to breaks in the chain of assignments and endorsements.

However, Article 3 of the UCC establishes anyone who possesses the note has the legal authority to enforce it. So foreclosing parties have countered that possession of the note should be enough.

As a result, some states, like Michigan, have ruled in favor of these borrower’s arguments by requiring reunification through valid assignment before foreclosures may proceed. Others have ruled that reunification is not necessary since MERS would be authorized to foreclose for the note holder on their behalf. In 2015, The Nevada Supreme Court actually clarified previous rulings by stating that the involvement of MERS actually cures the defect. This is because the note holder could potentially or theoretically direct or compel MERS to assign the deed of trust, resulting in reunifying the instruments.

Homebuyers should always ask questions

With the advent of eClosing solutions, eNotes, eVaults, and the MERS eRegistry , the real estate, title, and mortgage industry continues to build systems that improve the homebuying experience.

Despite all the advancements, homebuying can be a confusing and overwhelming process. It’s important to ask questions of the right real estate professionals. Hiring your own attorney to represent your interests in the real estate transaction is always a good idea.

While the pros and cons of MERS is debated, homeowners today will want to keep up with recommendations from the CFPB should they fall behind on their mortgage payments and reach out to their mortgage servicer as soon as possible.

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Amanda Farrell is a digital media strategist at PropLogix. She enjoys being a part of a team that gives peace of mind for consumers while making one of the biggest purchases of their lives. She lives in Sarasota with her bunny, Buster, and enjoys painting, playing guitar and mandolin, and yoga.

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What is an Assignment of Mortgage?

In real estate, an assignment of mortgage is the transfer of a mortgage, or mortgage note , to another party which typically happens on the servicing side or lender side. This is commonly seen one when lender sells or transfers your mortgage to another lender. Lenders typically have the right to to sell mortgages and assign them to new parties, but don’t typically allow borrowers to do the same. When a borrower transfers their mortgage obligation to a new party, this is called an assumed mortgage.

Assignment of Mortgage Examples

Examples where you will find assignment of mortgages include:

• Example 1. A lender selling your mortgage to another lender for servicing.

Here’s Property Shark’s definition of assignment of mortgage .

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What is an assignment of mortgage and how is it processed?

An Assignment of Mortgage is a process by which you can refinance your mortgage while saving money on mortgage taxes (this process is also known as a CEMA). We do allow assignments on existing credit union mortgages, however, we do not allow assignments on home equity products. The details, including associated fees, can be found below.

If you have a mortgage with another lender and are looking to refinance with the Credit Union under an assignment, you must first find out from the current lender if they allow assignments, any documentation they require, and all fees associated with the assignment. Once you are ready to move forward, you can apply with us . 　

Assignment of Mortgage Requirements

In order to process an Assignment of Mortgage, we will need the following documentation from you and/or your new lender:

• A commitment letter listing their address as they require it to read on the Assignment of Mortgage document.
• A copy of the mortgage schedule from the title search reflecting Jovia Financial Credit Union F/K/A Nassau Educators Federal Credit Union as lienholder on the subject property.
• A signed, authorization from all borrowers on the existing Jovia mortgage.

All documents can be e-mailed to the credit union at [email protected] or faxed to

(516) 714-2831, Attn: Loan Servicing.

We will begin processing your request once all documentation has been received. Please allow 7-10 business days for completion.

____________________________________________________________________________

All fees are due at closing.

*The closing attendance fee listed above is based on a closing in Nassau County. The fee may vary for closings outside of Nassau County.

The Credit Union’s attorney will bring the original Assignment of Mortgage to the closing.

To schedule attendance for your closing, please contact our attorneys, O’Reilly, Marsh & Corteselli P.C. directly at 516-741-1818.

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Mortgage Assignment Definition

It is important for real estate students and agents to understand how mortgage assignment takes place. As a real estate professional, I will help you define mortgage assignments for your real estate exam.

What Is Mortgage Assignment?

Mortgage lenders have the right to assign and sell their mortgages to other parties, while borrowers are not. If a borrower transfers their mortgage to another person, it is called an assumed mortgage.

How Does Assignment of Mortgage Take Place?

Effects of mortgage assignments.

Another thing that might change after mortgage assignment is the process that the lender will follow if the borrower defaults. Mortgage lenders use different notification methods, which the borrower must be familiar with to avoid confusion. The following are the effects of the assignment of mortgage:

Notice to Borrower

Modification, effects on escrow payments, mortgage assignment example, frequently asked questions, who files the assignment of mortgage, what happens after mortgage assignment, why do lenders sell mortgages, what is assignment fraud, what to know for the real estate exam.

A mortgage assignment is when the original lender transfers the mortgage to a new lender. This type of assignment is common between lenders who sell mortgages to each other. Lenders sell mortgages to free up capital and buy more mortgages to offer them to other borrowers. Mortgage assignment doesn’t change anything for the borrower, except that the borrower has to make mortgage payments to the new lender.

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A List of Mortgage Documents & What They Mean

Tags: mortgage process • homebuying • first-time buyers, article excerpt.

Almost every homebuyer using a mortgage will come across these documents before receiving keys to their new home. Here's what they are and what they mean.

First-time homebuyers might find the stack of papers they need to sign to be daunting, but once you know a bit about the mortgage process , it’s easy to understand. An attentive loan officer will also be of first importance to you.

The following is an overview of the documents you are likely to see at a residential closing, presented in the order they appear in the standard mortgage process. While these documents may relate to different steps in the process, you will sign many of them at the closing, which is the last step.

Image by Ag Ku from Pixabay

Step 1: Application

Most home purchases begin with an application for a mortgage loan. One document will likely appear at the closing.

Loan Application

Conventional loan programs use a standard form created by Fannie Mae and Freddie Mac, known as the Uniform Residential Loan Application . The FHA , VA , and USDA loan programs use this application, but may also require an addendum.

You will provide a great deal of information to the lender when you apply for the loan, including personally identifying information like your date of birth, documentation of your income and debts, and other factors that lenders need to know in order to make a decision. Lenders often present a final version of the loan application for the borrower to sign at closing.

Step 2: Consultation and Prequalification

Once you have submitted your loan application, you begin the process of prequalifying for a mortgage loan. A mortgage advisor can work with you to find options for your particular situation. Two important documents come out of this stage of the mortgage process.

Pre-Approval Letter

Sellers and their real estate agents want some assurance that anyone expressing serious interest in buying a property has the means to do so. A pre-approval letter demonstrates that you have a certain amount of financing already lined up.

Good Faith Estimate

The Truth-in-Lending Act requires lenders to provide information about how much a loan will cost you in terms of fees, interest, and other costs. The Good Faith Estimate (GFE) , or Loan Estimate , provides you with an overview of the likely costs associated with your future loan.

This document covers everything from the lender’s service charges to the monthly payment of principal, interest, and escrow. It allows you to compare different loans to determine which would be best for you.

Image by Aymanejed from Pixabay

Step 3: Home Shopping

This step covers the process of looking for a home with a real estate agent, making an offer, and negotiating a sales price. You may sign several documents during this stage, such as a sales contract, but these usually do not show up at closing.

Step 4: Processing

Once you have a contract on a home, your lender will get to work on putting your loan together. During this stage, the lender will generate a document that you can expect to see at the closing.

Truth-in-Lending Disclosure Statement

Your lender will provide you with a Closing Disclosure statement that shows the loan terms, the fees you must pay at closing for the loan, and a breakdown of your monthly payment. The terms of the loan must match those given to you in the GFE.

Steps 5 and 6: Appraisal and Underwriting

During these stages of the mortgage process, the lender may have a new appraisal conducted to confirm the home’s value. It will conduct a thorough review of every part of the loan application and all supporting documents before giving final approval. Two key documents for your loan will emerge from this step.

Promissory Note

This document is probably the most important of all of the mortgage documents since it creates the legal relationship between you and the lender. A promissory note is a contract in which you pledge to repay the full amount that the lender has given you to buy the house, along with interest.

Deed of Trust

Of roughly equal importance to the promissory note, the deed of trust gives the lender a security interest in the home you are buying. To put that another way, the deed of trust pledges the home as collateral for the loan. It gives the lender the right to foreclose on the property if you default on your mortgage payments.

Step 7: Closing

The final stage of the mortgage process brings everyone together to complete the deal. You might all meet at a title company office, or you and the seller might come in at different times to sign paperwork. Either way, the closing ends with the money for the home in escrow and you holding the key to the front door.

Image by trenttsd from Flickr [ Creative Commons ]

Closing Disclosure

The title company, or whoever else might be acting as the escrow agent, will prepare a document that shows what has happened to all of the money involved in the sale. A form known as the HUD-1 Settlement Statement used to be the standard for this purpose, but it is not as common as it once was. Both the buyer and the seller must sign this document.

The closing disclosure shows the total amount of money owed by you, minus the amount of the loan. It shows how all of the expenses and disbursements associated with the sale have been or will be paid, including loan origination fees, real estate agent commissions, escrow fees, title insurance, and payment of the seller’s mortgage. It also shows how property taxes for the current year will be split between the buyer and the seller. Finally, it shows how much money will go to the seller.

Warranty Deed

The deed conveys title to the home from the seller to you, the buyer. You probably won’t have to sign the deed, but from your point of view, it might be the most important document.

Affidavits, Declarations, and Agreements

The lender and/or the title company may want you to sign certain documents stating that you have provided accurate information and that you have received various required disclosures. You may also have to sign documents that function as separate contracts, such as a tax proration agreement if you and the seller are splitting the year’s property taxes.

Learn about what your mortgage process may look like.

Borrowing money to buy a home might seem like an overwhelming process, but it doesn’t have to be! We’re here to answer your questions. Check out our mortgage process page , or fill out a few quick questions and we’ll get back to you as soon as possible!

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This article was originally published on January 31, 2022 and last updated on August 17, 2023

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Satisfaction of Mortgage: What it is, How it Works

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

Lea Uradu, J.D. is a Maryland State Registered Tax Preparer, State Certified Notary Public, Certified VITA Tax Preparer, IRS Annual Filing Season Program Participant, and Tax Writer.

What Is a Satisfaction of Mortgage?

A satisfaction of mortgage is a document that confirms a mortgage has been paid off and details the provisions for the transfer of collateral title rights. Mortgage lenders are required to prepare satisfaction of mortgage documents that must be signed by all parties associated with the mortgage loan and collateral title.

Key Takeaways

• A satisfaction of mortgage is a signed document confirming that the borrower has paid off the mortgage in full and that the mortgage is no longer a lien on the property.
• Lending institutions are responsible for preparing and filing the satisfaction of mortgage with the appropriate county recorder, land registry office, city registrar, or recorder of deeds.
• Some borrowers prepay their mortgages by making extra mortgage payments in an effort to pay off their mortgages faster.
• A satisfaction of mortgage document includes details of the mortgage loan, provisions releasing the lender from a lien against the property, and the steps taken to transfer the property title.

How a Satisfaction of Mortgage Works

Lending institutions are responsible for preparing and filing the satisfaction of mortgage documents. Procedures surrounding satisfaction of mortgage documents and their filing are governed by individual states.

Many financial planners recommend accelerating mortgage payments in order to pay off a mortgage faster . Making the occasional extra mortgage payment—assuming the lender allows it without penalty—can slash months off the mortgage term and save thousands in interest costs. A viable strategy to expedite paying off a mortgage will help homeowners get the coveted satisfaction of mortgage document even sooner.

The satisfaction of mortgage is also useful if the owner wants to pledge the property as collateral for a business or personal loan. Of course, the merits of taking out a loan using the house as collateral, after spending decades paying off the mortgage, should be thoroughly considered before being done.

The Satisfaction of Mortgage Documentation Process

When a borrower prepays their mortgage or makes the final mortgage payment, a satisfaction of mortgage document must be prepared, signed, and filed by the financial institution in ownership of the mortgage. The satisfaction of mortgage document is created by a lending institution and their legal counsel.

Oftentimes the original mortgage lender will be responsible for the mortgage throughout its life. In some cases, a mortgage may have been sold by the mortgage lender to another financial institution. If sold, the owner of the mortgage at the time of the final payment is responsible for completing the satisfaction of mortgage documentation. If multiple parties have been involved in the loan, then it may take a few weeks for the final satisfaction of mortgage document to be prepared.

A satisfaction of mortgage document will include the names of all parties associated with the mortgage. Other basic information will include the details of the mortgage loan and its payments, an acknowledgment that all payments have been made in full, details on the mortgage loan’s collateral property, provisions releasing the lender from a lien against the property, and the steps taken to transfer the property title .

A satisfaction of mortgage document must be signed by all parties to be valid. Once signed it must be filed according to the procedures mandated by the state. Usually, the documentation will be filed with the county recorder, land registry office, city registrar, or recorder of deeds .

Once the satisfaction of mortgage is recorded with the appropriate agency, the mortgagor (the individual or entity that borrowed the money to buy the property) will have a clear title to the property.

Special Considerations

While the borrower is not directly responsible for creating the satisfaction of mortgage document and filing it with the appropriate agency, they should still follow the process closely to ensure that all steps have been completed. Some states will provide a specific timeframe for the completion of the satisfaction of mortgage documents. This can work to the advantage of the borrower in ensuring that the process occurs in a timely manner.

Once the process for the satisfaction of mortgage document has been completed, the borrower should also receive filing confirmation from the appropriate filing agency. In the event that a satisfaction of mortgage is not filed and recorded with the appropriate agency , the property could continue to show a lien against it despite repayment.

Cornell Law School Legal Information Institute. " 46 CFR § 67.265 - Requirements for Instruments Evidencing Satisfaction or Release ."

South Carolina Legislature. " Title 29 - Mortgages and Other Liens ."

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Assigning Loan Documents: Practical Reminders

The recent Supreme Court of Delaware case  J.M. Shrewsbury v. The Bank of New York Mellon ,   CA No. N15L-03-108 (Del. 2017), provides a reminder of the importance of clearly documenting the assignment of loan documents. The Court’s holding requires that prior to the assignee of a mortgage loan filing suit on the note or mortgage, the assignee must have received both an allonge/assignment of the note and an assignment of the mortgage. The case is a reminder of the importance of maintaining a precise chain of title when assigning loan documents. The facts of the case as described below demonstrate the need to make sure that you “don’t leave the note behind.”

In 2007, J.M. Shrewsbury and Kathy Shrewsbury signed a promissory note in favor of Countrywide Home Loans, Inc. Concurrently, the Shrewburys were granted a mortgage to secure their obligations under the note, which mortgage encumbered real property in Delaware. In 2011, the mortgage was assigned to The Bank of New York Mellon (Bank). In 2013, the Shrewsburys requested and received a copy of the original note, which contained no indication that the note had been assigned. Neither party disputed the fact that the Shrewsburys stopped making mortgage payments in 2010.

The Bank commenced a mortgage foreclosure action in 2015 in the Superior Court of the State of Delaware,  Bank of N.Y. Mellon v. Shrewsbury , C.A. No. N15L-03-108 CLS (Del. Super. Ct. Feb. 17, 2016). In holding in favor of the Bank, the Superior Court found that the Bank need only show that it had a valid assignment of the mortgage to enforce its rights. The Shrewsburys appealed the decision to the Court.

In reversing and remanding the decision of the Superior Court, the Court followed its reasoning in Iowa-Wisconsin Bridge Co. v. Phoenix Finance Corporation, Iowa-Wisconsin Bridge Co. v. Phoenix Finance Corporation , 25 A.2d 383, 389 (Del. 1942), stating that a debt is an essential requisite to a mortgage. While persuaded by wide-ranging case law and other respected authorities, the Court’s decision relied most heavily on the United States Supreme Court case  Carpenter v. Longan,  83 U.S. 271 (1872), holding that the “note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.”

Practical Reminders

While this case involved a residential transaction, important considerations can be applied in commercial mortgage transactions whether in connection with construction, bridge or permanent mortgage financing, a loan sale, a transfer of a loan to an affiliate of the original lender, or other assignment of the loan.

Practical reminders include:

• Make sure that the chain of title is precise when assigning the mortgage, the note and other collateral documents such as assignments of leases and rents, guarantees and UCC’s. Don’t leave the note “behind.”
• Assign and endorse the note by allonge so that the chain of title is complete. Firmly affix the allonge(s) to the underlying note.
• Keep good records of all documentation, including recorded ( i.e. the mortgage an assignment of mortgage) and unrecorded documents. Retain originals in a safe place (such as under the control of a custodian or servicer or in a vault) and copies of all loan documents including assignment documents.
• When the loan is assigned, always deliver the original note along with the original allonge.

Members of our Real Estate and Finance Groups regularly handle commercial real estate financing and sales transactions throughout the country. If you have questions or would like further information, please contact Tim Davis ( davist@whiteandwilliams.com ; 215.864.6829) or Pat Haggerty ( haggertyp@whiteandwilliams.com ; 215.864.6811).

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Experts Predict What the Real Estate Market Will Look Like Once Mortgage Rates Drop

The high mortgage rates that have paralyzed America’s housing market are falling—and could nosedive further by the end of the year.

Rates for a 30-year fixed mortgage plunged to 6.47%—the lowest in over a year—for the week ending Aug. 8, according to Freddie Mac.

And with inflation losing steam and the economy cooling, expectations are high that the Federal Reserve could make not just one, but two rate cuts by the end of this year.

As a result,  Realtor.com® senior economist  Ralph McLaughlin expects mortgage rates to drop further in September and December, which is “encouraging news for potential homebuyers who have been waiting to participate in the market.”

This is also encouraging news for homeowners who might be thinking of selling. Is it time to finally list their property on the market? And if they do, what should they expect?

To help shed some light on what’s coming down the pike for home sellers, here’s what real estate experts predict will happen to the housing market once rates take the plunge.

The ‘lock-in effect’ will ease—and homeowners will start selling

A recent Realtor.com analysis found that 86% of homeowners have mortgage rates below 6% . Understandably, many feel “ locked in ,” unwilling to trade in their low rate for today’s higher ones if they sell and buy again.

“Home sellers have been sitting on the sidelines, not wanting to give up their COVID-era interest rates,” says Tan Tunador , vice president and senior loan officer with Atlantic Coast Mortgage .

But once rates drop further, that could change.

“The faster rates drop, the less homeowners will be held in place and we could see both new inventory and more sales,” says Danielle Hale , chief economist of Realtor.com.

“There are a significant number of sellers that couldn’t stomach—right or wrong—going from a 4% rate to a 7.5% rate,” says Mason Whitehead , a Dallas-based branch manager for Churchill Mortgage . “But they can stomach going from 4% to something in the 5% to 6% range.”

(Allen J. Schaben / Los Angeles Times via Getty Images)

More homebuyers will enter the market

In the same vein that sellers have felt frozen in place, buyers have felt iced out of the market. But if mortgage rates continue to decline, then experts predict more buyers who’ve been on the sidelines finally jump into the market.

“When rates drop, I think you will see pent-up demand hit the market again,” says Whitehead.

Some buyers, like sellers, shelved their house hunt because they felt the payment was too high, but a lower rate makes home shopping more affordable.

“For some that didn’t qualify at 7.5%, they will qualify at 6%,” says Whitehead. “So you have more people able to buy as well.”

In other words, once rates fall, the market will see both more sellers willing to sell, and buyers willing and able to buy.

Sales will come on fast and strong

Any seller thinking of listing would be wise to start prepping right now.

“Mortgage rates have been improving, and they are bringing potential buyers out early, many of whom gave up on buying, either because of the low housing inventory or the higher rate environment the past few years,” says Tunador. “For sellers, listing their house early may give them the opportunity to sell before their competition hits the market.”

Other experts agree: There are definitely signs homebuying activity is beginning to bounce off the mat.

“Mortgage applications have perked up, and refinancing activity also looks to be picking up as rates go lower and owners carrying elevated mortgage rates seek to reduce their monthly payments,” says Charlie Dougherty , director and senior economist at Wells Fargo .

“All told, mortgage applications remain low, but the recent upturn is a promising sign that buying activity is starting to heat up and defrost a housing market frozen by higher interest rates,” adds Dougherty.

And if mortgage rates continue to shift south, things might get even toastier.

“When mortgage rates [stay in] a sub-6.5% average, we will really see the housing inventory increase and sales activity boom,” says Tunador.

Home prices will likely remain high

The good news for sellers is that even as the market gets moving, home prices are expected to remain high, or dip only slightly.

“Sellers will continue to be in a historically strong position, as the U.S. housing market is still short millions of homes,” says Dan Hnatkovskyy , co-founder and CEO of NewHomesMate . “Assuming there isn’t a severe recession, we will likely see only modest price decreases in most markets in 2024.”

However, Hnatkovskyy says that formerly hot markets like Denver, Austin, TX, and Phoenix may see a more significant drop in housing prices as smaller investor money sits on the sidelines for most of 2024. But in general, experts don’t see home prices taking a major dive as interest rates start to descend.

Even so, it will be smart for sellers not to get too cocky with their home pricing.

(Getty Images)

“Sellers may benefit from realistic pricing and encouraging buyer competition,” says Cassandra Happe , an analyst for WalletHub . “Working with a real estate agent to price strategically and enhancing online presence with 3D tours can maximize the chances of a quick and profitable sale.”

In other words, sellers shouldn’t set their hopes price too high lest they price themselves out of the market.

“Housing affordability will likely remain strained given still-high mortgage rates and the rapid run-up in home prices over the past three years,” says Dougherty. A shaky economy could “keep the pace of home sales relatively tepid.”

Multiple offers may make a comeback

The increase in competition among buyers might mean that sellers once again find themselves in the enviable position of being able to choose from several offers for their homes.

“Sellers will be in luck when mortgage rates start to drop: They’ll have multiple offers to consider and have some extra leverage when negotiating,” predicts Bryson Taggart , senior agent partnership manager for Opendoor . “For example, sellers receiving multiple offers can drive up the price of their home or waive contingencies for an easier close and a more convenient timeline.”

Still, sellers need to remember that the highest offer isn’t always the best offer.

“I advise sellers to evaluate offer terms holistically and select the one that aligns best with their wants and needs,” says Taggart.

For some, that could be an offer from a more qualified buyer or a cash buyer, which provides less of a risk for fall-throughs. If a seller is planning to also purchase a home, they should pick a buyer with favorable terms for an efficient close.

Kimberly Dawn Neumann is a journalist based in New York City and the author of hundreds of articles on home-related topics for major publications, including Forbes, Real Simple, and Realtor.com. For more information, visit www.KDNeumann.com or IG @dancerscribe.

Twitter Follow @KimberlyNeumann

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Why do mortgage rates move when the Fed keeps interest rates stable?

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For the past year, the interest rate set by the Federal Reserve — the federal funds rate — has stayed the same . At the same time, average rates for a 30-year fixed interest mortgage have bounced around from as high as nearly 7.8% last fall to as low as 6.6% in February, according to Freddie Mac .  

So if the Fed’s rate is unchanged, why do mortgage rates keep moving around ? The answer matters to borrowers hoping for mortgage rates to fall soon.

That includes Nicole Wildart. About a year and a half ago, she bought a house in Maryland, with a mortgage rate well above 6%. She said she knew that was going to be tough to afford in the long term, but she figured she would refinance as soon as it made sense. So she’s been watching mortgage rates ever since.

“I usually search for like, ‘When are they going to lower? Please tell me when the rates are going to lower?’” she said.

The results from those searches have not been satisfying. Mortgage rates are still higher than what she’s looking for, and she’s getting frustrated. 

“I know, the Fed sets the rates, and then the interest rates for home mortgages are based on some relationship to that,” Wildart said.

That’s a good starting point — but there’s more to mortgages than the Fed’s interest rate.

Think of a mortgage like a layer cake. The federal funds rate is the first layer; that’s the rate many observers expect the Fed to cut in September . It’s essentially the amount it costs banks to lend money to each other.

“The Fed funds rate is their cost of doing business,” said Nancy Wallace, a professor at the University of California Berkeley’s Haas School of Business. 

A bank will want to make up for that cost when it offers you a mortgage, so your rate will likely be higher than the federal funds rate.

Then, there’s a layer that accounts for inflation, Wallace said.

“For people to be willing to hold a 30-year mortgage, where they expect tomorrow’s dollar to be worth less than today’s dollar, they’re going to price that into the interest rate that they’re going to be willing to offer that mortgage for,” she said.

So, you’ve got the lender’s cost of doing business, then inflation expectations. Those are topped with another layer of that cake, which is where things get more complicated. Because after a lender gives you a mortgage, they usually don’t hold onto it . 

“They end up selling it to investors, who then package these mortgages, and they just become another financial instrument,” said Selma Hepp, chief economist at CoreLogic.

Those packages are known as mortgage-backed securities. Other investors then buy up these securities.

“The more investors that you have, they’re competing for that product, and so the price of the product goes down,” Hepp said.

It’s in this layer — the market for mortgage-backed securities — where mortgage rates are really determined. Investor demand and competition with other investments drive rates up and down, according to Andy Walden, vice president of research and analysis at Intercontinental Exchange.

“It’s folks that are investing in those mortgage-backed securities and what interest rate they’re really requiring to invest in those securities,” he said. “How much risk do they see? And how much risk-free return could they get elsewhere?”

Investors are specifically weighing the return they could get from one of the safest investments around: U.S. government bonds — 10-year treasury bonds in particular.

Those bonds are considered safe because, “I know the government’s going to pay me back,” Walden said. “That’s a risk-free loan that I’m giving them.”

Mortgage-backed securities, by comparison, are famously not as safe .

“It’s a little bit riskier to lend to an end consumer where they may not be able to perform on that debt,” Walden said. “They may default.”

Or a borrower could refinance, meaning the investor won’t get all the interest. Those risks push mortgage-backed securities — and therefore mortgage rates — above 10-year treasury yields.

But the two track pretty closely together. Lately, treasury yields have been heading lower because investors are buying more of them as they move money away from riskier investments. And that could push mortgage rates down further, unleashing a lot of pent-up activity in the housing market.

“If mortgage rates drop, you’re going to see a surge in home buying and home selling, as well as probably mortgage refinancing,” said Guy Cecala, head of the research firm Inside Mortgage Finance. 

In Maryland, Nicole Wildart hopes to be part of that refinancing surge. 

“If I could even just get it to 6.0%, that would be a huge win for our monthly finances,” she said.

For now, she’ll keep watching rates — hoping they come down. 

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19 Facts About Tim Walz, Harris’s Pick for Vice President

Mr. Walz, the governor of Minnesota, worked as a high school social studies teacher and football coach, served in the Army National Guard and chooses Diet Mountain Dew over alcohol.

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By Simon J. Levien and Maggie Astor

• Published Aug. 6, 2024 Updated Aug. 9, 2024

Until recently, Gov. Tim Walz of Minnesota was a virtual unknown outside of the Midwest, even among Democrats. But his stock rose fast in the days after President Biden withdrew from the race, clearing a path for Ms. Harris to replace him and pick Mr. Walz as her No. 2.

Here’s a closer look at the Democrats’ new choice for vice president.

1. He is a (very recent) social media darling . Mr. Walz has enjoyed a groundswell of support online from users commenting on his Midwestern “dad vibes” and appealing ordinariness.

2. He started the whole “weird” thing. It was Mr. Walz who labeled former President Donald J. Trump and his running mate, Senator JD Vance of Ohio, “weird” on cable television just a couple of weeks ago. The description soon became a Democratic talking point.

3. He named a highway after Prince and signed the bill in purple ink. “I think we can lay to rest that this is the coolest bill signing we’ll ever do,” he said as he put his name on legislation declaring a stretch of Highway 5 the “Prince Rogers Nelson Memorial Highway” after the musician who had lived in Minnesota.

4. He reminds you of your high school history teacher for a reason. Mr. Walz taught high school social studies and geography — first in Alliance, Neb., and then in Mankato, Minn. — before entering politics.

5. He taught in China in 1989 and speaks some Mandarin. He went to China for a year after graduating from college and taught English there through a program affiliated with Harvard University.

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