The vast majority of people have no clue that individuals, small investors, and IRAs can buy and sell mortgage loans. It is one of the best ways to get real estate exposure to a portfolio, but how does it work? Banks and big lenders sell loans all the time. If you’ve ever had a loan on your home, I’m sure you’ve received a letter in the mail that your loan has been sold/transferred to another lender.
When two lenders agree to the sale of a loan, they enter into a Loan Sales Agreement, with is basically exactly what it sounds like it is. Most loan sales are done in bulk where hundreds or thousands of loans are sold at the same time, but each loan file must include two documents that transfer the loan, the Alonge and the Assignment.
The Alonge (sometimes spelled Allonge) is a fancy French word that means “to lengthen”. The form accompanies the Promissory Note and transfers ownership from the seller to the buyer. It is not filed in public records, but must be with the file in order to transfer ownership.
The Assignment, called the Assignment of Mortgage or the Assignment of Deed of Trust depending upon the State the collateral sits in, transfers ownership of the security instrument (the Deed of Trust or Mortgage) from one lender to another. This does need to be filed with the Clerk of Court in the County or Parrish where the collateral is located, but in practice many lenders let is sit in the loan file until they need to foreclose or release the security agreement…I’m not saying it’s right…that’s just what they do. In recent years, the Mortgage Electronic Registry System, or MERS, has made it possible to name MERS as a nominee in the security agreement so that the Assignment does not have to be filed each time a member of MERS transfers loans between members. This caused many lawsuits during the foreclosure crisis and was quite controversial, but courts more and more side with lenders in this practice. Technically, the Assignment should be filed when a Mortgage or Deed of Trust is sold. We go into greater detail in our Members Section and in our Executive Program. Let us know if you have any questions be contacting us through