An assignment of mortgage occurs when the original mortgage lender, known as the assignor, transfers their ownership and rights of your mortgage loan to another party called the assignee. This transaction is documented with an official assignment of mortgage agreement, which is typically recorded in the local county records to maintain public transparency.
For you as a borrower, this means that although the ownership of your mortgage changes, your loan terms—including interest rate, monthly payment, and loan duration—remain the same. The new owner simply steps into the original lender’s position. Additionally, the company servicing your loan, responsible for collecting payments and managing escrow accounts, may change; however, you will always be notified in advance as required by the Real Estate Settlement Procedures Act (RESPA).
Lenders assign mortgages for several practical reasons. Selling loans frees up capital so lenders can issue new loans, manages and diversifies financial risk, and supports the secondary mortgage market where large entities like Fannie Mae and Freddie Mac buy loans to maintain liquidity in mortgage lending nationwide. Assignments also enable lenders to focus on their specialties, such as originating or servicing loans, or result from mergers and acquisitions in the banking sector.
It’s important to distinguish an assignment of mortgage from similar terms:
- A mortgage assumption involves changing the borrower who takes over an existing loan, usually requiring lender approval.
- A novation creates an entirely new contract replacing the old one, involving all parties’ consent.
As a borrower, you don’t need to reapply or undergo a credit check when your mortgage is assigned. Always keep thorough records of your mortgage documents and carefully read any notices regarding your loan’s ownership or servicing changes. In case of confusion or suspicious communications, verify the changes with your known servicer contacts and never stop making your payments to avoid credit damage.
For further details on mortgage servicing transfers, see our article on Mortgage Servicer Transfer and for clarifications on loan assumption, refer to our Loan Assumption glossary. Understanding these distinctions helps keep you informed and in control of your home loan.
References
- Consumer Financial Protection Bureau, “What happens if my loan servicer changes?” https://www.consumerfinance.gov/consumer-tools/mortgages/manage-your-mortgage/what-happens-if-my-loan-servicer-changes/
- Investopedia, “Assignment of Mortgage,” https://www.investopedia.com/terms/a/assignmentofmortgage.asp
- Fannie Mae, “What is the Secondary Mortgage Market?” https://www.fanniemae.com/about-us/what-we-do/what-is-secondary-mortgage-market