Written by attorneys · grounded in primary & secondary sources — see below
The national market in which existing mortgages are bought and sold, usually on a package basis. Transfers in this market move both the promissory obligation and the mortgage security interest together unless the parties expressly agree otherwise.
Sources & Authorities
How it applies
Common Examples
2
Note and Mortgage Transferred Separately
Sapphire Holdings originated a loan to Sarah Sullivan secured by a mortgage on her warehouse. Sapphire later sold the promissory note to Prime Vessel under one agreement and assigned only the mortgage to Dawn Coastal under a second agreement that made no reference to the note. When Sarah defaulted, Dawn recorded the mortgage assignment and sought to foreclose while Prime demanded payment on the note. The court treated the mortgage as following the note to Prime because the parties had supplied no evidence of intent to separate the two instruments in the secondary market.
Borrower Challenges Foreclosure Authority
Scott Summers obtained a loan from KB Home Mortgage Company and later defaulted. KB sold the note on the secondary market, after which MERS initiated foreclosure proceedings. Scott sued, alleging that the entity directing foreclosure was neither the note's owner nor authorized by the owner. The court rejected the claim because the secondary-market transfer presumptively carried enforcement rights with the note.
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Restatements
Casebooks
Study Supplements
Dictionaries
Gomes v. Countrywide Home Loans121 Cal. Rptr. 3d 819 (Cal. App. 2011)
Common questions
Frequently Asked
4
What distinguishes the secondary mortgage market from the primary mortgage market?+
The primary market is where lenders originate new loans to borrowers. The secondary market is where those existing loans and their security interests are later purchased and resold, often in pools.
Supporting sources
When a mortgage is assigned without an accompanying indorsement of the note, who may enforce the mortgage?+
The law presumes that the mortgage follows the note unless the parties clearly agree to separate them. The holder of the note therefore obtains the right to enforce the mortgage even if the mortgage assignment alone was recorded.
Supporting sources
Why does the law strongly favor keeping the note and mortgage in the same hands during secondary-market transfers?+
Separating the obligation from the mortgage renders the note unsecured as a practical matter. That outcome produces economic waste and gives the mortgagor an unwarranted windfall, so the law supplies a presumption of unity absent clear contrary evidence.
Supporting sources
Does a borrower have standing to challenge foreclosure merely because the loan was sold on the secondary market?+
No. A borrower lacks standing to contest foreclosure on the ground that the foreclosing party is not the note owner unless the borrower can show that the transfer actually split the note from the mortgage and that the split was intended.
Supporting sources
8 N.Y.3d 90 (N.Y. 2006)Property
…20 [1979]; see Witter v Taggart , 78 NY2d 234, 238 [1991]). It is the incongruity between the needs of the modern electronic secondary mortgage market and our venerable real property laws regulating the market that frames the issue before us. I The Suffolk County Clerk, pursuant to the Recording Act, has a duty to record conveyances…
Real PropertyMortgages/security devices · TransfersUBEIntermediate