Assignments of Notes, Mortgages and Receivables

Assignment basics

An assignment transfers a right — for example, the right to receive payment under a contract — from the assignor to the assignee. The underlying obligation of the person who owes the payment usually stays the same; what changes is who is entitled to receive it.

The mortgage follows the note

Courts have long held that a mortgage securing a note is an incident of the debt. In Carpenter v. Longan, 83 U.S. (16 Wall.) 271 (1872), the Supreme Court described the note and mortgage as inseparable — the note as essential and the mortgage as an incident. The UCC reflects the same idea: under § 9-203(g), the attachment of a security interest in a right to payment secured by a mortgage is also attachment of a security interest in the mortgage.

Recorded assignments of mortgage

Separately from the note, the party holding the mortgage or deed of trust may record an assignment in the county land records. Recording requirements and their effect are set by state law. See chain of title.

Notice to the borrower

Under the federal Truth in Lending Act, 15 U.S.C. § 1641(g), for a mortgage loan secured by the borrower’s principal dwelling, not later than 30 days after the loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee must notify the borrower in writing of the transfer, including the information the statute lists.

Assignment of accounts (receivables)

Under UCC § 9-406(a), an account debtor may discharge its obligation by paying the assignor until it receives a notification of the assignment that reasonably identifies the rights assigned and directs payment to the assignee; after that, it may discharge the obligation only by paying the assignee. Section 9-406(d) makes many contract terms that restrict assignment of accounts ineffective; under § 9-406(e), that rule does not apply to sales of payment intangibles or promissory notes.

Researching assignments in your state

To research assignments for a real matter, start with the primary sources. For example, read the statute, the rule and the documents in your own file. Then look for recent appellate decisions from your state, because they control how local courts read the law. After that, compare what you found with the federal rules that may also apply. Our state procedures guide and the Research Center can help you find and check each source.

Sources and further reading

Official sources used on this page:

• law.cornell.edu
• law.cornell.edu
• law.cornell.edu
• supreme.justia.com

Related reading on Lawtopolis:

• Indorsement, Negotiation and Transfer of Notes
• Chain of Title
• Receivables and the Sale of Accounts (UCC Article 9)
• Forward Flow Agreements
• Standing