The term “Mortgage Note” or “Note” refers to the promise to pay signed by the homeowner or obligor.
The term “Mortgage” refers to the real estate security instrument (mortgage or deed of trust) that must be filed with the local land registry to perfect the rights of the holder of the note and that is subject to the Statute of Frauds.
Note that Standard Fannie and Freddie Uniform Instruments cross-reference the note and the mortgage and provide that a breach of covenants in either document provides right to accelerate balance due and declare a default.
State law determines how mortgages travel—always travel by assignment due to statute of frauds. An assignment is a conveyance of a security interest in real property.
State law governs the necessity to record assignments. Some state laws have been amended to accommodate MERS, but not that many.
Failure to record an assignment is a matter of priority and perfection if a bankruptcy is filed…
There’s been plenty of recent media attention to the prospect of investor lawsuits over fraudulent mortgages and mortgage securities. But investor lawsuits against mortgage servicers could be even more damaging than these other lines of legal inquiry. The four largest banks hold nearly half a trillion dollars worth of second-lien mortgages on their books—loans that could be decimated if investors successfully target improper mortgage servicing operations. The result would be major trouble for the financial system. The result would be major trouble for too-big-to-fail behemoths.
Mortgage servicers are the banking industry’s debt collectors. They accept payments and forward them along to investors who own mortgage securities– servicers themselves don’t actually own the mortgages they handle. This is a recipe for trouble for a variety of reasons, but one of the biggest problems is the fact that the nation’s four largest banks also operate the four largest mortgage servicers. Bank of America, Wells Fargo, JPMorgan Chase and Citigroup service about half of all mortgages in the United States. They also have multi-trillion-dollar businesses whose interests often conflict with those of mortgage security investors.
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