What is a Collateral Assignment of Mortgage and How Do You Handle It?
Imagine you're ready to insure the sale of a property, from Vincent L. Gambini to Mona Lisa Vito. Everything seems straightforward – there's a mortgage to be satisfied, but that's standard procedure. However, the title commitment mentions an additional requirement: a "Collateral Assignment of Mortgage" involving Wahzoo City Bank and Brooklyn Bank.
What's a Collateral Assignment?
Think of it as a loan within a loan. Wahzoo City Bank didn't simply sell the Gambini mortgage, they used it as collateral to secure their own loan from Brooklyn Bank. So, Brooklyn Bank has a stake in the transaction.
Why Does This Matter?
Is a simple mortgage satisfaction enough? No, you need both. The Collateral Assignment of Mortgage served as security for a loan from Brooklyn Bank to Wahzoo City Bank. Simply satisfying the Gambini mortgage doesn't clear Brooklyn Bank's interest. They need to be satisfied too, either through:
- Satisfaction of the Collateral Assignment: Brooklyn Bank acknowledges they no longer have a claim on the mortgage.
- A Reassignment: Brooklyn Bank assigns their interest in the Gambini mortgage back to Wahzoo City Bank.
Watch Out for Hidden Assignments
The document might not be titled "Collateral Assignment" – it could just be an "Assignment of Mortgage." Don't be fooled. Carefully review the document's content. Was it an absolute transfer of the underlying loan, or was it used as collateral to the assignor? Remember, a little extra vigilance can save you a big headache down the road.
Whether you’re dealing with a complex commercial transaction or a property sale with collateral assignment, it’s crucial to have a dependable underwriter to help you navigate the complexities that arise in real estate transactions. If you encounter a situation like this, or anything else seems unclear in the title search, don’t hesitate to contact your underwriter or Stewart agency representative. We’re here to support you and ensure a smooth closing for you and your clients.
For more information, reach out to your local Stewart representative or visit virtualunderwriter.com for up-to-date information on the latest in underwriting.
If you are a Stewart Trusted Provider, feel free to contact your Stewart underwriting counsel with questions.
Interested in more? Check out these articles.
General Requirements to Insure a Leasehold Estate
Navigating Title Insurance for Submerged Lands and Shorelines
Wire Fraud 101: What is Wire Fraud and How Can You Help Prevent It?
Protect Sellers From Loan Modification Claims