In the mortgage business, assignment denotes handing over or transferring the privileges mentioned in a loan agreement to a third party through a written document. The rules state that all mortgage agreements, barring a few like the individual service deals, are transferable.

Transferring a mortgage

Assignment or transfer of rights or property mortgages is a common issue in the real estate business. For instance, it is possible for the first lender or mortgagee to sell the mortgage or loan to another financer by signing an assignment deed. In this case, the sale of the mortgage would imply that the first lender is transferring the registered mortgage along with the privilege to collect the unpaid amount owed by the mortgagor to the original lender as per the mortgage contract. However, the money that the second lender will pay to the original mortgagee will depend on a comparative study between the terms and conditions mentioned in the mortgage agreement and the prevailing market situation at the time of assigning or selling the mortgage.

The original mortgage will require offering a markdown to the second lender to make the proposal lucrative to the prospective buyer in the event of the prevailing interest rate being higher compared to the fees mentioned in the mortgage agreement. The discount or reduction in price will by and large raise the yield and also enable the first lender to find a suitable assignee for the mortgage sale. On the other hand, a prospective investor will be willing to pay more money to the original mortgagee for purchasing the credit if the rates mentioned in the mortgage agreement are above the existing market rates.

Transfer of mortgage contract

In addition to sale of the rights of a mortgage by the original lender to another investor, transfer of contract or the rights mentioned in the agreement is also possible in the instance of a real estate being sold. In the event of a prospective buyer deciding to transfer the privileges of the sale contract to a company or any other third party before closing the deal, he or she may possibly include a specific clause in the sale agreement in the sale deed. The probable clause in the contract may be something like - "The purchaser pledges and agrees that he or she would in no mode, whether unswervingly or in some way, transfer, rent out, pass on, register or under any circumstance market the property, put up for sale or obliquely reassign his or her privileges under this contract before the maturity date of the agreement to any other individual without obtaining the direct permission of the seller." It may be noted here that it is the sole discretion of the seller of the property to grant, deny or hold back such permission.

In all such situations, it is important that the seller cautiously mull over such kind of rights transfer as is it unlikely that once the agreement is signed, the seller will have any other alternative against the first purchaser. Here is a word of caution for the seller. No seller should enter into such an agreement if it comprises a seller take-back mortgage.

Liabilities vs. privileges

According to the prevailing rules, an indebted party is not allowed to assign or transfer the legal responsibilities mentioned in an agreement so as to persuade the second party to agree to take the activities of a disparate third party. Nevertheless, there is a provision in the law allowing the obliged party to assign the liabilities to the second party provided there is a direct approval or oblique intent of the concerned parties to permit the transfer of responsibilities in the mortgage agreement. In the instance the responsibility does not comprise a particular individual requirement and if it is deemed that the responsibility was carried out by any party apart from the individual who is firstly accountable, the legal courts may rule that such an objective was oblique.

Contrary to the responsibilities, the rights or privileges mentioned in an agreement can be transferred easily. The only instance when the rights cannot be assigned on grounds of assurance between the concerned parties or individual requirements where the transfer of rights would enhance or modify the responsibilities. For instance, the court will never entail a plan to allow a transfer of rights without the approval of the seller of the property.

To Top