Posted by sheltn on 10/15/11 10:04am
Msg #400620

Deed vs. Note

If someone owns the deed to the house and someone else has a mortgage
on the deed, does the note holder have rights on the renter? This property
is in Tn. Thoughts?

Reply by Ilene C. Seidel on 10/15/11 10:20am
Msg #400625

I would hope the noteholder is on title?

Reply by Susan Fischer on 10/15/11 10:23am
Msg #400627

Generally speaking, a lien-holder does not have the

rights of ownership - i.e., the right of possession, the right to lease, the right to encumber, etc. So, all things being equal, the homeowner signs the lease with the renter, not the lender. I can't imagine a deed-holder giving away rights of ownership to a note-holder.

On the other hand, if the note is in default, the remedies to recover include foreclosure, and could very well impact a renter through no fault of his own, in that the homeowner failed to pay as promised.

Not legal advice, yadayada.

Reply by Linda_H/FL on 10/15/11 11:14am
Msg #400635

Re: Generally speaking, a lien-holder does not have the

Also, most mortgages/security instruments provide for an Assignment of Rents in the event of default....meaning the lender has an automatic right to collect the rents to offset the debts.

Reply by Susan Fischer on 10/15/11 12:07pm
Msg #400641

Great point. n/m

Reply by Teresa/FL on 10/16/11 8:21am
Msg #400678

Re: Generally speaking, a lien-holder does not have the

There are many properties that were originally purchased as primary residences or second homes and later on were converted to investment or rental use.

If this is the case, a 1-4 Family Rider (Assignment of Rents) would not have been included in the mortgage so the lienholder would not automatically have the right to collect rents directly from the tenants if they are not being paid by the property owner.

Reply by Linda_H/FL on 10/16/11 8:36am
Msg #400679

There is boilerplate language within the body of the

mortgage that addresses this:

"Assignment of Rents. Borrower unconditionally assigns and transfers to Lender all rents and revenues of the property. Borrower authorizes the Lender or Lender's agents to collect the rents and revenues and hereby directs each tenant of the property to pay the rents to the Lender or Lender's agents..."

The above is from a mortgage for owner-occupied property.

Reply by Teresa/FL on 10/16/11 6:22pm
Msg #400700

Isn't that the language in the 1-4 Family Rider?

I am not aware of any standard Mortgage that contains such language, therefore my statement regarding primary residences or second homes vs. investment properties.

Reply by Linda_H/FL on 10/16/11 6:42pm
Msg #400701

That language I posted came from a mortgage I just

did yesterday...and I've seen it in many other boilerplate conventional mortgages...usually toward the end - paragraph 18, 19, somewhere around there.

You're right, 1-4 Family Riders are used on investment properties...but that language I posted appears in conventional mortgages for owner-occupied properties.

Reply by Teresa/FL on 10/16/11 9:03pm
Msg #400704

I have not seen it in any Mortgage other than those with a

1-4 Family Rider.

The Fannie Mae/Freddie Mac Unform Instrument does not show this. The loan packages you are handling must be some other type. Maybe this is a reaction to the current state of the mortgage industry and the lenders are trying to cover themselves when a primary residence is converted to an investment property.

Reply by Linda_H/FL on 10/17/11 5:29am
Msg #400714

Have seen this clause in mortgages for years...this is

nothing new or product-specific...I'm surprised you've never seen it, Teresa.

Reply by ReneeK_MI on 10/17/11 5:33am
Msg #400715

I've never seen it either - curious, is that a Credit Union

mtg? I'm wondering if they're using proprietary Instruments, and not Fannie/Freddie? I haven't bothered to actually notice, come to think of it.

Reply by Linda_H/FL on 10/17/11 7:54am
Msg #400724

Nope....conventional loan from national

lenders - also saw it last week in a reverse mortgage.

I reveiw each page of the mortgage with the borrowers, pointing out paragraphs and terms - I've seen this so many times I almost know it by heart. Have seen it in conventional loans, FHA, VA, reverses, HELOC's - don't see it every time but have seen it more often than not during my 30 years doing closings.

Reply by ReneeK_MI on 10/17/11 5:24am
Msg #400713

Too many variables to speculate on this

If someone "owns the deed" and someone else has the mortgage ...

1. Were both parties originally holding joint title, but only one party was mortgaging/borrowing, then that borrowing party QC'd off title? If so, the person left on title would've previously assigned their rights to the Lender when they signed off on the mtg, assuming ....

2. ...that the original mtg was indeed a Fannie/Freddie Uniform Security Instrument. It may well have not been, and in that event nobody could begin to speculate what the contract states.

3. Or, did the title holder obligated on the mtg sell/transfer title to another person who did NOT originally assign their rights on the original mtg (again, assuming the use of F/F Mtg) - this would make the second party a "Successor In Interest of Borrower" (as described within the aforementioned mtg)

4. Or ...is this one of the MANY unfortunate situations where a person "buys" on Land Contract from the obligated borrower - who may/may not have done a QCD - and now Borrower is defaulting and 'renter' thought they had ownership rights over the Lender's rights?

Like I said, way too many variables & this is PURELY conversational speculation - I'm not anywhere near an attorney.

Reply by JanetK_CA on 10/17/11 3:53pm
Msg #400763

Re: Too many variables to speculate on this

Great post, Renee! And an excellent example of how much more there is to know about so much of what we deal with daily than what meets the eye. A little bit of knowledge can be a dangerous thing if it's used to make assumptions. After all, we don't know what we don't know...