What is an Assignment of a Deed of Trust?

Jim B.
Jim B.
Businessman with a briefcase
Businessman with a briefcase

An assignment of a deed of trust occurs when a loan used to buy a home is transferred from one lender to another. This usually occurs when the original lender sells the loan to another lender in exchange for cash. Deeds of trust are used in some states in the United States in place of a traditional mortgage because, in case of the loan being defaulted, lenders can place a lien on the property without court interference. For a borrower, an assignment of a deed of trust has no effect on their original payment schedule.

Most home purchases are achieved through a loan from a bank or another lending institution, simply because only a select few people have the kind of capital to make such a purchase without any help. This loan usually comes in the form of a mortgage, which yields the up-front cash necessary for the borrower to make the purchase while establishing a payment schedule for repayment of the loan. In states such as California in the US, the mortgage can come in the form of a deed of trust between the borrower and lender. When these documents change hands between lenders, it is known as an assignment of a deed of trust.

The transaction involved in an assignment of a deed of trust usually occurs when one lender buys the deed of trust from another. Such buying and selling of loans allows lenders to keep their lending rates relatively low. It is not unusual for one specific deed of trust to change hands several times over the span of a loan, especially in the case of a typical home loan that spans decades.

Borrowers should realize that there is little consequence for them when an assignment of a deed of trust takes place. The borrower will be notified if the institution that holds the loan changes, and there might be some adjustment in the paperwork he or she would have to file and the location to which payments are sent. But the overall payment structure, both in terms of the amount owed and the time payments are due, will remain unchanged.

When a borrower defaults on a deed of trust, the lender essentially can place a lien on the land and do so without any court proceedings. Whoever holds the loan can sell the property in such circumstances. The ability to take such steps is what secures the loan, and it is why lenders will buy loans from other lenders without fearing that they'll be stuck with a delinquent borrower.

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