When you close on a home loan, the critical original documents—including the promissory note and deed of trust—are handed over to a Document Custodian. This third-party custodian acts as a secure vault, safeguarding these legally binding papers on behalf of lenders and secondary market investors. Their independent role ensures the authenticity and completeness of the loan documents, creating a trustworthy chain of custody essential for investor confidence and fraud prevention.
Why is a Document Custodian Necessary?
Most mortgage lenders do not keep loans on their books but sell them to investors such as Fannie Mae or Freddie Mac through the secondary mortgage market. Before these investors commit funds, they require verification that each loan’s paperwork is genuine, properly executed, and complete. The Document Custodian fulfills this by receiving the original documents from the lender, auditing and certifying them, then storing them in a secure, fire-resistant facility. This process prevents fraud, enables smooth transfers of loan ownership, and supports the efficient functioning of the mortgage market.
How Does the Document Custodian Work?
- Closing: You sign your mortgage documents.
- Document Transfer: The lender sends the original “wet-ink” documents to the custodian.
- Verification: The custodian reviews the file to confirm all signatures, details, and pages are accurate.
- Certification: Once verified, the custodian certifies and files the documents securely.
- Notification: The lender and investors are informed that the loan package is complete and certified.
- Custody Duration: The documents remain with the custodian until the mortgage is paid off, at which point they are returned for lien release.
Key Documents Protected
- Promissory Note: Your legally binding promise to repay the loan. This original note is crucial for proving debt ownership.
- Mortgage or Deed of Trust: The security instrument linking your loan to your property, allowing foreclosure rights if payment is not made.
- Assignments of Mortgage: Records the legal transfer of the loan when sold between lenders or investors.
Clearing Up Common Misconceptions
- The document custodian is not your loan servicer; the servicer handles payment processing and borrower communication.
- If you have questions or issues about your mortgage payments, always contact your loan servicer, not the custodian.
- The custodian’s independent role is essential to prevent issues such as lost documents or fraudulent approvals that contributed to past mortgage industry problems.
For more on related mortgage documents, see our glossary entries on Promissory Note and Secondary Mortgage Market.
For further detailed information, refer to Fannie Mae’s Selling Guide on Custody of Mortgage Documents and IRS.gov.