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. This means Brooklyn Bank now 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 Wahzoo City Bank’s loan from Brooklyn Bank. Satisfying only the Gambini mortgage doesn’t clear Brooklyn Bank’s interest. They must also be released through one of the following:
- Satisfaction of the Collateral Assignment: Brooklyn Bank confirms it no longer has a claim on the mortgage.
- Reassignment: Brooklyn Bank assigns its interest in the Gambini mortgage back to Wahzoo City Bank.
Watch Out for Hidden Assignments
The document may not explicitly say “Collateral Assignment.” It could appear as a standard Assignment of Mortgage. Don’t assume — review the document carefully. Was it an absolute transfer of the underlying loan, or was it used as collateral to the assignor? A little extra diligence now can prevent major title headaches later.
Whether you’re handling a complex commercial deal or a residential sale involving a collateral assignment, it’s crucial to work with a dependable underwriter who can help you navigate the nuances of real estate transactions. If anything in the title search seems unclear, contact your underwriter or Stewart agency representative. We’re here to help ensure every closing is smooth and secure for you and your clients.
For more information, reach out to your local Stewart representative or visit virtualunderwriter.com for the latest underwriting guidance.
If you are a Stewart Trusted Provider, contact your Stewart underwriting counsel with any questions.
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