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Understanding the Assignment of Mortgages: What You Need To Know

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A mortgage is a legally binding agreement between a home buyer and a lender that dictates a borrower's ability to pay off a loan. Every mortgage has an interest rate, a term length, and specific fees attached to it.

Written by Attorney Todd Carney .  Updated November 26, 2021

If you’re like most people who want to purchase a home, you’ll start by going to a bank or other lender to get a mortgage loan. Though you can choose your lender, after the mortgage loan is processed, your mortgage may be transferred to a different mortgage servicer . A transfer is also called an assignment of the mortgage. 

No matter what it’s called, this change of hands may also change who you’re supposed to make your house payments to and how the foreclosure process works if you default on your loan. That’s why if you’re a homeowner, it’s important to know how this process works. This article will provide an in-depth look at what an assignment of a mortgage entails and what impact it can have on homeownership.

Assignment of Mortgage – The Basics

When your original lender transfers your mortgage account and their interests in it to a new lender, that’s called an assignment of mortgage. To do this, your lender must use an assignment of mortgage document. This document ensures the loan is legally transferred to the new owner. It’s common for mortgage lenders to sell the mortgages to other lenders. Most lenders assign the mortgages they originate to other lenders or mortgage buyers.

Home Loan Documents

When you get a loan for a home or real estate, there will usually be two mortgage documents. The first is a mortgage or, less commonly, a deed of trust . The other is a promissory note. The mortgage or deed of trust will state that the mortgaged property provides the security interest for the loan. This basically means that your home is serving as collateral for the loan. It also gives the loan servicer the right to foreclose if you don’t make your monthly payments. The promissory note provides proof of the debt and your promise to pay it.

When a lender assigns your mortgage, your interests as the mortgagor are given to another mortgagee or servicer. Mortgages and deeds of trust are usually recorded in the county recorder’s office. This office also keeps a record of any transfers. When a mortgage is transferred so is the promissory note. The note will be endorsed or signed over to the loan’s new owner. In some situations, a note will be endorsed in blank, which turns it into a bearer instrument. This means whoever holds the note is the presumed owner.

Using MERS To Track Transfers

Banks have collectively established the Mortgage Electronic Registration System , Inc. (MERS), which keeps track of who owns which loans. With MERS, lenders are no longer required to do a separate assignment every time a loan is transferred. That’s because MERS keeps track of the transfers. It’s crucial for MERS to maintain a record of assignments and endorsements because these land records can tell who actually owns the debt and has a legal right to start the foreclosure process.

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Assignment of Mortgage Requirements and Effects

The assignment of mortgage needs to include the following:

The original information regarding the mortgage. Alternatively, it can include the county recorder office’s identification numbers. 

The borrower’s name.

The mortgage loan’s original amount.

The date of the mortgage and when it was recorded.

Usually, there will also need to be a legal description of the real property the mortgage secures, but this is determined by state law and differs by state.

Notice Requirements

The original lender doesn’t need to provide notice to or get permission from the homeowner prior to assigning the mortgage. But the new lender (sometimes called the assignee) has to send the homeowner some form of notice of the loan assignment. The document will typically provide a disclaimer about who the new lender is, the lender’s contact information, and information about how to make your mortgage payment. You should make sure you have this information so you can avoid foreclosure.

Mortgage Terms

When an assignment occurs your loan is transferred, but the initial terms of your mortgage will stay the same. This means you’ll have the same interest rate, overall loan amount, monthly payment, and payment due date. If there are changes or adjustments to the escrow account, the new lender must do them under the terms of the original escrow agreement. The new lender can make some changes if you request them and the lender approves. For example, you may request your new lender to provide more payment methods.

Taxes and Insurance

If you have an escrow account and your mortgage is transferred, you may be worried about making sure your property taxes and homeowners insurance get paid. Though you can always verify the information, the original loan servicer is responsible for giving your local tax authority the new loan servicer’s address for tax billing purposes. The original lender is required to do this after the assignment is recorded. The servicer will also reach out to your property insurance company for this reason.  

If you’ve received notice that your mortgage loan has been assigned, it’s a good idea to reach out to your loan servicer and verify this information. Verifying that all your mortgage information is correct, that you know who to contact if you have questions about your mortgage, and that you know how to make payments to the new servicer will help you avoid being scammed or making payments incorrectly.

Let's Summarize…

In a mortgage assignment, your original lender or servicer transfers your mortgage account to another loan servicer. When this occurs, the original mortgagee or lender’s interests go to the next lender. Even if your mortgage gets transferred or assigned, your mortgage’s terms should remain the same. Your interest rate, loan amount, monthly payment, and payment schedule shouldn’t change. 

Your original lender isn’t required to notify you or get your permission prior to assigning your mortgage. But you should receive correspondence from the new lender after the assignment. It’s important to verify any change in assignment with your original loan servicer before you make your next mortgage payment, so you don’t fall victim to a scam.

Attorney Todd Carney

Attorney Todd Carney is a writer and graduate of Harvard Law School. While in law school, Todd worked in a clinic that helped pro-bono clients file for bankruptcy. Todd also studied several aspects of how the law impacts consumers. Todd has written over 40 articles for sites such... read more about Attorney Todd Carney

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• The Legally Invalid Assignment Defense to Foreclosure

People who are facing the possibility of a foreclosure on their home may want to investigate the history of their mortgage. If the assignment to the foreclosing party is not valid, this may be a viable defense to a foreclosure. In some states, you can demand that the foreclosing party produce a written assignment of the mortgage. If it does not have an assignment or failed to record it as required by state law, this may result in the dismissal of the foreclosure action. Recording rules may require that the foreclosing party record the assignment before starting the foreclosure.

Courts in other states are more lenient in their review of assignments. Since the mortgage is closely associated with the promissory note, the foreclosing party may be allowed to enforce the promissory note even if it cannot produce a valid assignment of the mortgage. You should seek legal guidance in your state to determine whether this defense may be viable.

Homeowners who believe that they may have a defense based on an invalid assignment may wish to consult with a knowledgeable foreclosure lawyer, since this defense can become complicated. Justia offers a lawyer directory to simplify researching, comparing, and contacting attorneys who fit your legal needs.

The Relationship Between Mortgages and Promissory Notes

The mortgage and the promissory note are the two key documents attached to a loan for buying a home. Some purchases involve a deed of trust rather than a mortgage, but they are functionally equivalent in this context. While the promissory note is your guarantee to repay the loan, the mortgage gives the lender the right to foreclose if you do not repay the loan as arranged. The mortgage also identifies the property that will serve as security for the loan. Thus, the two documents work together in establishing the lender’s rights.

The Role of Mortgage Assignments in Loan Transfers

A bank or other lender often will sell a mortgage to another party, which will collect payments and pursue the homeowner if they fail to keep up with the mortgage. To transfer the loan, the original lender will endorse the promissory note to the new owner of the mortgage. This is because collection efforts hinge on owning the promissory note. If the foreclosing party cannot produce the promissory note, the homeowner will have a defense to the foreclosure.

Meanwhile, the new owner will record the assignment of the mortgage. This includes transferring the right to foreclose, as provided by the mortgage, to the new owner. The assignment will provide the amount of the mortgage and the names of the homeowner, the original lender, and the new owner of the mortgage. It also will contain a description of the property attached to the mortgage and the date when the mortgage took effect.

An invalid assignment defense may only be a temporary solution until the new owner records an assignment in their name.

The mortgage industry uses a tool known as the Mortgage Electronic Registration System (MERS) to keep track of assignments. MERS may be a nominee for the lender, or it may receive the mortgage as an assignment. If MERS is the current assignee, it cannot pursue a foreclosure because it does not have an interest in the promissory note. MERS simply serves as an agent for the current owner of the mortgage and assists in creating a record for transfers of the mortgage. This allows banks to more easily transfer loans among them without creating a new assignment each time. You may have a defense against a foreclosure action if MERS is listed as the owner of the mortgage. However, this likely will be only a temporary solution until the new owner records an assignment in their name.

Last reviewed October 2023

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Deed of Assignment: Everything You Need to Know

A deed of assignment refers to a legal document that records the transfer of ownership of a real estate property from one party to another. 3 min read updated on January 01, 2024

Updated October 8,2020:

A deed of assignment refers to a legal document that records the transfer of ownership of a real estate property from one party to another. It states that a specific piece of property will belong to the assignee and no longer belong to the assignor starting from a specified date. In order to be valid, a deed of assignment must contain certain types of information and meet a number of requirements.

What Is an Assignment?

An assignment is similar to an outright transfer, but it is slightly different. It takes place when one of two parties who have entered into a contract decides to transfer all of his or her rights and obligations to a third party and completely remove himself or herself from the contract.

Also called the assignee, the third party effectively replaces the former contracting party and consequently assumes all of his or her rights and obligations. Unless it is stated in the original contract, both parties to the initial contract are typically required to express approval of an assignment before it can occur. When you sell a piece of property, you are making an assignment of it to the buyer through the paperwork you sign at closing.

What Is a Deed of Assignment?

A deed of assignment refers to a legal document that facilitates the legal transfer of ownership of real estate property. It is an important document that must be securely stored at all times, especially in the case of real estate.

In general, this document can be described as a document that is drafted and signed to promise or guarantee the transfer of ownership of a real estate property on a specified date. In other words, it serves as the evidence of the transfer of ownership of the property, with the stipulation that there is a certain timeframe in which actual ownership will begin.

The deed of assignment is the main document between the seller and buyer that proves ownership in favor of the seller. The party who is transferring his or her rights to the property is known as the “assignor,” while the party who is receiving the rights is called the “assignee.”

A deed of assignment is required in many different situations, the most common of which is the transfer of ownership of a property. For example, a developer of a new house has to sign a deed of assignment with a buyer, stating that the house will belong to him or her on a certain date. Nevertheless, the buyer may want to sell the house to someone else in the future, which will also require the signing of a deed of assignment.

This document is necessary because it serves as a temporary title deed in the event that the actual title deed for the house has not been issued. For every piece of property that will be sold before the issuance of a title deed, a deed of assignment will be required.

Requirements for a Deed of Assignment

In order to be legally enforceable, an absolute sale deed must provide a clear description of the property being transferred, such as its address or other information that distinguishes it from other properties. In addition, it must clearly identify the buyer and seller and state the date when the transfer will become legally effective, the purchase price, and other relevant information.

In today's real estate transactions, contracting parties usually use an ancillary real estate sale contract in an attempt to cram all the required information into a deed. Nonetheless, the information found in the contract must be referenced by the deed.

Information to Include in a Deed of Assignment

• Names of parties to the agreement
• Addresses of the parties and how they are binding on the parties' successors, friends, and other people who represent them in any capacity
• History of the property being transferred, from the time it was first acquired to the time it is about to be sold
• Agreed price of the property
• Size and description of the property
• Promises or covenants the parties will undertake to execute the deed
• Signatures of the parties
• Section for the Governors Consent or Commissioner of Oaths to sign and verify the agreement

If you need help understanding, drafting, or signing a deed of assignment, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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Mortgage Assignment Laws and Definition

(This may not be the same place you live)

  What is a Mortgage Assignment?

A mortgage is a legal agreement. Under this agreement, a bank or other lending institution provides a loan to an individual seeking to finance a home purchase. The lender is referred to as a creditor. The person who finances the home owes money to the bank, and is referred to as the debtor.

To make money, the bank charges interest on the loan. To ensure the debtor pays the loan, the bank takes a security interest in what the loan is financing — the home itself. If the buyer fails to pay the loan, the bank can take the property through a foreclosure proceeding.

There are two main documents involved in a mortgage agreement. The document setting the financial terms and conditions of repayment is known as the mortgage note. The bank is the owner of the note. The note is secured by the mortgage. This means if the debtor does not make payment on the note, the bank may foreclose on the home. 

The document describing the mortgaged property is called the mortgage agreement. In the mortgage agreement, the debtor agrees to make payments under the note, and agrees that if payment is not made, the bank may institute foreclosure proceedings and take the home as collateral .

An assignment of a mortgage refers to an assignment of the note and assignment of the mortgage agreement. Both the note and the mortgage can be assigned. To assign the note and mortgage is to transfer ownership of the note and mortgage. Once the note is assigned, the person to whom it is assigned, the assignee, can collect payment under the note. 

Assignment of the mortgage agreement occurs when the mortgagee (the bank or lender) transfers its rights under the agreement to another party. That party is referred to as the assignee, and receives the right to enforce the agreement’s terms against the assignor, or debtor (also called the “mortgagor”). 

What are the Requirements for Executing a Mortgage Assignment?

What are some of the benefits and drawbacks of mortgage assignments, are there any defenses to mortgage assignments, do i need to hire an attorney for help with a mortgage assignment.

For a mortgage to be validly assigned, the assignment document (the document formally assigning ownership from one person to another) must contain:

• The current assignor name.
• The name of the assignee.
• The current borrower or borrowers’ names. 
• A description of the mortgage, including date of execution of the mortgage agreement, the amount of the loan that remains, and a reference to where the mortgage was initially recorded. A mortgage is recorded in the office of a county clerk, in an index, typically bearing a volume or page number. The reference to where the mortgage was recorded should include the date of recording, volume, page number, and county of recording.
• A description of the property. The description must be a legal description that unambiguously and completely describes the boundaries of the property.

There are several types of assignments of mortgage. These include a corrective assignment of mortgage, a corporate assignment of mortgage, and a mers assignment of mortgage. A corrective assignment corrects or amends a defect or mistake in the original assignment. A corporate assignment is an assignment of the mortgage from one corporation to another. 

A mers assignment involves the Mortgage Electronic Registration System (MERS). Mortgages often designate MERS as a nominee (agent for) the lender. When the lender assigns a mortgage to MERS, MERS does not actually receive ownership of the note or mortgage agreement. Instead, MERS tracks the mortgage as the mortgage is assigned from bank to bank. 

An advantage of a mortgage assignment is that the assignment permits buyers interested in purchasing a home, to do so without having to obtain a loan from a financial institution. The buyer, through an assignment from the current homeowner, assumes the rights and responsibilities under the mortgage. 

A disadvantage of a mortgage assignment is the consequences of failing to record it. Under most state laws, an entity seeking to institute foreclosure proceedings must record the assignment before it can do so. If a mortgage is not recorded, the judge will dismiss the foreclosure proceeding. 

Failure to observe mortgage assignment procedure can be used as a defense by a homeowner in a foreclosure proceeding. Before a bank can institute a foreclosure proceeding, the bank must record the assignment of the note. The bank must also be in actual possession of the note. 

If the bank fails to “produce the note,” that is, cannot demonstrate that the note was assigned to it, the bank cannot demonstrate it owns the note. Therefore, it lacks legal standing to commence a foreclosure proceeding.

If you need help with preparing an assignment of mortgage, you should contact a mortgage lawyer . An experienced mortgage lawyer near you can assist you with preparing and recording the document.

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What is an Assignment of Mortgage?

In real estate, an assignment of mortgage is the transfer of a mortgage, or mortgage note , to another party which typically happens on the servicing side or lender side. This is commonly seen one when lender sells or transfers your mortgage to another lender. Lenders typically have the right to to sell mortgages and assign them to new parties, but don’t typically allow borrowers to do the same. When a borrower transfers their mortgage obligation to a new party, this is called an assumed mortgage.

Assignment of Mortgage Examples

Examples where you will find assignment of mortgages include:

• Example 1. A lender selling your mortgage to another lender for servicing.

Here’s Property Shark’s definition of assignment of mortgage .

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Mortgage Deed

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A Mortgage Deed , also known as a Mortgage Agreement, is a document where a borrower of money grants the lender of that money conditional ownership in a property as a security interest against the loan until the loan is paid in full . If the borrower fails to repay the money as agreed, the lender then becomes the owner of the property used as security and will have the power to sell it to recoup the costs of the unpaid loan. This document is separate from a Secured Promissory Note or Loan Agreement , which creates the actual loan and more fully sets out the terms and conditions of the loan itself.

Mortgage Deeds are most commonly used to secure a loan taken out by the borrower to purchase a piece of property or home . The purchase of a property or home is often a big investment that involves a substantial amount of money. Lenders will want added security before loaning large sums of money to ensure that they will recoup their investment. A Mortgage Deed allows them to take possession and sell the property if the Borrower stops making loan payments. It also gives buyers the ability to borrow large sums of money and provides an incentive to make payments on the loan or risk losing their property. A Mortgage Deed is used specifically to put up a piece of real property, like land or a home, as security . To use personal items, such as jewelry or a car, to secure a loan, use a Security Agreement instead.

A Mortgage Deed is very similar to a Deed of Trust , but the two documents operate differently to serve similar purposes. A Mortgage Deed and a Deed of Trust both create a lien on a property to secure repayment of a loan. However, a Mortgage Deed is only between two parties – the Borrower and the Lender – whereas a Deed of Trust is between three parties – the Borrower, the Lender, and the Trustee . In a Deed of Trust, the Trustee holds the title to the property in trust for the Lender. A Deed of Trust also allows the Trustee to initiate a foreclosure sale on the property without a court order if the Borrower is in default on the loan – also called the "power of sale". In contrast, the Lender under a Mortgage Deed would have to initiate foreclosure proceedings through the courts unless the borrower agrees to grant them the power of sale in the Mortgage Deed.

How to use this document

This document contains all of the information necessary to use a piece of real property as security or collateral for a loan. The Mortgage Deed includes all of the important information, such as:

• Name and contact information for both Parties
• Description of the type of property being mortgaged, using its legal description, found on previous deeds or tax forms, and the location of the property
• Outline of the basic terms of the promissory note or loan agreement that is being secured by the property , such as how often payments will be made, the amount of the payments, and any applicable interest rates and/or penalties

Once the Mortgage Deed is completed, the borrower must sign and date it in front of a notary and have the document notarized . A notary page is included at the end of the document. After the Mortgage Deed is signed and notarized, it needs to be recorded in the county where the property is located . Often a small fee must be paid at the time of filing. The county will keep the original copy of the Deed, but the Parties should keep a copy of the Deed in a safe and secure location for their records and in case of future dispute.

Applicable law

Mortgage Deeds are governed by state law . Different states have different requirements for when and how the Deed should be filed. Contact the local county Register of Deeds to get information about which governmental agency should be given the Deed to file and record before being returned to the parties.

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Guides to help you

• Mortgage Deed vs. Deed of Trust
• Foreclosure and Eviction FAQ

Other names for the document:

Deed of Mortgage, House Mortgage Agreement, Mortgage Agreement, Property Mortgage Contract, Mortgage Contract

Country: United States

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What is an Assignment of Trust Deed?

Assigning a deed of trust transfers it to a new lender.

Ryan McVay/Photodisc/Getty Images

More Articles

•   1. How Can an Heir Take Title to a Deed That Has an Outstanding Mortgage?
•   2. Warranty Deed Vs. Deed of Trust
•   3. Types of Mortgage Instruments

A trust deed, formally known as a deed of trust, is used with mortgages in some states to streamline things in the event of foreclosure. As with normal mortgages, the lender may sometimes choose to assign, or transfer, the deed of trust to another lender. The assignment doesn't change the borrower's obligations under the deed of trust; she will be equally obligated to repay the new lender as well.

Deed of Trust

Mortgages using a deed of trust have the same legal effect as other types of mortgages: They allow a property buyer or owner to take out a loan that uses the property as security on that loan. But the deed of trust mortgage differs slightly by using a third party, the trustee, as part of the transaction. In order to secure the loan, the property owner transfers title in the property to the trustee via deed of trust. The trustee then holds the deed over the life of the mortgage.

Use of Deed

The trustee holds the deed of trust as evidence of his right to take title to the property on the lender's behalf if the borrower defaults, or fails to perform, on the loan. In a typical mortgage scenario, the lender must go to court for the right to foreclose on the property. In a deed of trust scenario, the lender gives the trustee the right to foreclose on the deed of trust by selling the property.

Assigning Trust Deeds

For financial benefit, lenders sometimes choose to sell their rights in deed of trust mortgages to other lenders. This process is known as assignment of the mortgage. Unless the language of the mortgage or deed of trust prohibits it, a lender may assign the deed of trust at any time over the life of the mortgage, and many mortgages go through several lenders over their lifetime.

Effect of Assignment

Assignment of a deed of trust will not affect the borrower's rights and obligations regarding the mortgage. The new lender will typically inform the borrower of the transfer, and the borrower may need to send mortgage payments to a new company, but otherwise, the assignment is not that significant from the borrower's end. If the borrower is unhappy about the assignment, she has several options: pay off the mortgage outright; take out a new mortgage with a different company in order to pay off the old one; or attempt to negotiate with the new lender to change the terms of the loan.

• Cornell Legal Information Institute: Deed of Trust
• U.S. Legal: Deed of Trust Law and Legal Definition
• StopForeclosureFraud.com: What Is an Assignment of Mortgage?
• 'Lectric Law Library: Assignment of Mortgage or Deed of Trust

Erika Johansen is a lifelong writer with a Master of Fine Arts from the Iowa Writers' Workshop and editorial experience in scholastic publication. She has written articles for various websites.

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Assignment of Rents – What, Why, and How?

Article by:

Madelaine prescott, esq., share this post:.

• November 29, 2023

These days, almost all commercial loans include an Assignment of Rents as part of the Deed of Trust or Mortgage. But what is an Assignment of Rents, why is this such an important tool, and how are they enforced?

An Assignment of Rents (“AOR”) is used to grant the lender on a transaction a security interest in existing and future leases, rents, issues, or profits generated by the secured property, including cash proceeds, in the event a borrower defaults on their loan. The lender can use the AOR to step in and directly collect rental payments made by the tenant. For an AOR to be effective, the lender’s interest must be perfected, which has a few fairly simple requirements. The AOR must be in writing, executed by the borrower, and recorded with the county where the property is located. Including an AOR in the recorded Deed of Trust or Mortgage is the easiest and most common way to ensure the AOR meets these requirements should it ever need to be utilized.

When a borrower defaults, lenders can take advantage of AORs as an alternative to foreclosure to recoup their investment. With a shorter timeline and significantly lower costs, it is certainly an attractive option for lenders looking to get defaulted borrowers back on track with payments, without the potential of having to take back a property and attempting to either manage it or sell it in hopes of getting your money back out of the property. AORs can be a quick and easy way for the lender to get profits generated by the property with the goal of bringing the borrower out of default. But lenders should carefully monitor how much is owed versus how much has been collected. If the AOR generates enough funds so that the borrower is no longer in default, the lender must stop collecting rents generated by the property.

Enforcement of an AOR can also incentivize borrowers to work with the lender to formulate a plan, as many borrowers rely on rental income to cover expenses related to the property or their businesses. Borrowers are generally more willing to come to the table and negotiate a mutual, amicable resolution with the lender in order to protect their own investment. A word of warning to lenders though: since rental income is frequently used to pay expenses on the property, such as the property manager, maintenance, taxes, and other expenses, the lender needs to ensure they do not unintentionally hurt the value of the property by letting these important expenses fall behind. This may hurt the lender’s investment as well, as the property value could suffer, liens could be placed on the property, or the property may fall into disrepair if not properly maintained. It is also important for lenders to be aware of the statutes surrounding the payment of these expenses when an AOR is being used, as some state’s statutes require the lender to pay certain property expenses out of the collected rents if requested by the borrower.

In addition to being shorter and cheaper than foreclosure, AORs can be much easier to enforce. In California, the enforcement of an AOR is governed by California Civil Code §2938. This statute specifies enforcement methods lenders can use and restrictions on use of these funds by the lender, among other things. Under CA Civil Code §2938(c), there are 4 ways to enforce an AOR:

• The appointment of a receiver;
• Obtaining possession of the rents, issues, profits;
• Delivery to tenant of a written demand for turnover of rents, issues, and profits in the correct form; or
• Delivery to assignor of a written demand for the rents, issues, or profits.

One or more of these methods can be used to enforce an AOR. First, a receiver can be appointed by the court, and granted specific powers related to the AOR such as managing the property and collecting rents. They can have additional powers though; it just depends on what the court orders. This is not the simplest or easiest option as it requires court involvement, but this is used to enforce an AOR, especially when borrowers or tenants are uncooperative. Next is obtaining possession of the rents, issues, profits, which is exactly as it seems; lenders can simply obtain actual possession of these and apply the funds to the loan under their AOR.

The third and fourth options each require delivery of a written demand to certain parties, directing them to pay rent to the lender instead of to the landlord. Once the demand is made, the tenant pays their rent directly to the lender, who then applies the funds to the defaulted loan. These are both great pre-litigation options, with advantages over the first two enforcement methods since actual possession can be difficult to obtain and courts move slowly with high costs to litigate. The written demands require a specific form to follow called the “Demand To Pay Rent to Party Other Than Landlord”, as found at CA Civil Code §2938(k). There are other notice requirements to be followed here, so it is essential to consult with an experienced attorney if you are considering either of these options. California Civil Code §2938 specifically provides that none of the four enforcement methods violate California’s One Action Rule nor the Anti-Deficiency Rule, so lenders can confidently enforce their AORs using the above methods with peace of mind that they are not violating other California laws.

Whether you are looking to originate a new loan, or you are facing a default by your borrower, understanding what an Assignment of Rents is and how it operates can be extremely beneficial. Enforcing an AOR can be an easier option than foreclosure and can help promote a good relationship with your borrower when handled correctly. If you have any questions about AORs, or need further details on how to enforce them, Geraci is here to help.

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If the borrower is not capable of producing sufficient income proof to support his loan application or where the borrower is a limited company, the bank will usually require the borrower to provide a guarantor acceptable to the bank. The guarantor will be required to execute a deed of guarantee to the bank. In respect of a borrower which is a limited company, the guarantor is usually a director or major shareholder of the borrower.

The bank will usually incorporate a "principal debtor clause" in the guarantee giving the bank the right to request the guarantor to pay without first demanding payment from the borrower.

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