What Happens to Deed of Trust When the Loan Is Sold?
Mortgage loans are frequently sold into the secondary mortgage market after closing. A mortgage loan is documented using a recorded mortgage or deed of trust document. These documents show the legal description of the mortgaged property, show the names of the mortgage lender and borrowers and describe the terms of the mortgage loan. Ownership of a home loan documented with a deed of trust is transferred using an assignment of deed of trust.
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Deed of Trust
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A deed of trust establishes and describes the terms of a mortgage loan. States using deeds of trust require appointment of a trustee to act as an impartial third party between the mortgage company and mortgage borrowers. The trustee handles legal matters related to the mortgage loan including full or partial reconveyances and foreclosure. The deed of trust also contains terms and conditions for the mortgage loan. The deed of trust defines the terms of default and other conditions associated with the mortgage loan.The trustee records the deed of trust in the records office of the county or other jurisdiction where the property is located. Recording a deed of trust makes a home loan a matter of public record and the mortgage lien is shown on title documents for the property.
Assignment of Deed of Trust
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If you take out a home loan from a mortgage company, you might receive notice that your mortgage loan is being sold within a few weeks after closing. Home loans are commonly sold, and the sale of your mortgage does not reflect on your credit or character. When your home loan is sold, an assignment of deed of trust is prepared and recorded. The assignment is similar to a deed conveying title to your home to a new owner. The assignment of deed of trust legally transfers ownership of your mortgage loan to a new mortgage company or investor.
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The Role of Recording
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Recording mortgage documents including deeds of trust and assignments of deeds of trust provide a legal record of mortgage loans against a specific property and also document the entities holding mortgages against a specific property. A recorded assignment of deed of trust indicates that ownership of a mortgage loan has been transferred. An assignment of deed of trust does not change the terms of the mortgage loan. Mortgage companies may also prepare but not record an assignment of deed of trust. Until an assignment of deed of trust is recorded, public records show the original lender as the holder of the mortgage loan.
Deed of Trust Remains Valid
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A home loan may be bought and sold multiple times, but the original deed of trust remains valid and unchanged except for the assignment of deed of trust providing the name of the new loan owner and the date of the transfer. Mortgage servicing companies and trustee companies preparing assignments of deeds of trust must ensure that information appearing on the assignment matches the deed of trust perfectly. Otherwise, title problems and legal challenges can occur.
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