Transferring Rights to a Note

28 Feb Transferring Rights to a Note

Foreclosure defense requires tracing the rights to a mortgage to make sure that the foreclosing party has the right to foreclose. It also requires tracing rights to the payment obligation represented by the underlying promissory note, to insure that the foreclosing party is actually owed the money.

(A promissory note is a payment obligation. A mortgage creates a lien which secures a note’s payment obligation and gives the right to foreclose on the lien.)

By law in most states, if not all (Uniform Commercial Code, 3-203(c)), a note cannot be enforcedby an assignee. It can only be enforced by an endorsee.

A check is a type of a note. Like a check, any note’s transfer must be by endorsement – a signed instruction on the note itself. An assignment is different from an endorsement. It is a separate document. It cannot transfer enforcement rights to the note (again, in most states).

Sometimes therights to the note get separated from rights to the mortgage. Your state law will tell you what happens and who can foreclose, the note holder or the mortgage holder. In Massachusetts, the mortgage holder can only act on the direction of the note holder and has no independent authority to foreclose.

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L. Jed Berliner practices exclusively in consumer bankruptcy, foreclosure defense, and related consumer protection litigation such as credit card defenses and suing debt collectors. He established his Springfield, MA practice in 1988. Attorney Berliner is a regular and active contributor to the Bankruptcy Law Network, the Bankruptcy Roundtable, and the National Association of Consumer Bankruptcy Attorneys, three specialized consumer bankruptcy forums on the Internet, and is an informal mentor to regional practitioners. He is recognized by his peers as an expert in consumer bankruptcy issues. He thoroughly enjoys being rated "excellent" in his client surveys.

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