Not a Party: Challenging Mortgage Assignments

Abstract

Aside from notes and mortgages themselves, perhaps no agreement is as pivotal to the modern foreclosure process as the written assignment. Mortgage originators have utilized assignments to transfer both title and the rights to enforce notes and mortgages. As a result of the assignability of these instruments and agreements and of the newly emergent Mortgage Electronic Registration Systems, Inc. (MERS), lenders were able to securitize loans more easily and inexpensively, which ostensibly lowered mortgage costs and increased home ownership during the rise of the American real estate market in the 2000s. Of course, hindsight has led many to question if lenders overlooked the creditworthiness of borrowers in the rush to originate loans ripe for securitization or if those loans were based on properties being systematically overvalued. Much like the securitization process itself, the foreclosure process often relies on the assignability and assignments of mortgages.

The crash of the housing bubble brought many troubling documentation issues to light in the foreclosure context. As a result of the dizzying multitude of loan transfers that occurred during the rise of the market, homeowners raised several issues with respect to proving that such loan transfers occurred or that valid assignments were made. To date, however, courts have been unable to generate a cohesive framework for addressing deficiencies in assignments of mortgage-related documents. Courts have adopted a variety of approaches, none of which appear to recognize the need for procedural fairness, title certainty, and public records integrity. This brief Article is intended to provide an overview of the assignment issue as well as the possible repercussions arising from inconsistent or improper judicial treatment.

Keywords: Mortgage Assignment, Foreclosure, MERS, Standing