Mortgages and assignments

Recently I received an email from a homeowner asking if Massachusetts law requires that a mortgage that “is transferred from one company to another” be recorded in the registry of deeds. After explaining that the registry of deeds is the custodian of the records and cannot provide legal advice to individuals, I tried to provide some general information that might also answer the customer’s question. Assuming he was referring to an assignment of a mortgage, this is what I wrote:

What most people call a mortgage in Massachusetts is really two different documents. First is the promissory note. That's a contract between the borrower and the lender that establishes the debt and sets out the terms of repayment. The promissory note does not get recorded at the registry of deeds. Promissory notes are often "sold" or transferred from lenders to investors (often other banks). When the note is paid off, the holder of the note (the lender or someone who it has been transferred to) stamps it "paid" and returns it to the borrower.

The second document is the mortgage. In Massachusetts, a mortgage is a type of deed. When you sign a document called a mortgage, you convey to the lender an interest in the property. That interest is the right to foreclose on the mortgage if the borrower defaults in the payment of the note. That means the lender can auction off the property and use the proceeds from the auction sale to pay off or pay down the debt owed on the promissory note. (The lender can then sue the borrower for any deficiency that remains, but that’s a story for another day).

When a lender sells or transfers a note to an investor, the lender normally records at the registry of deeds a document called an assignment of mortgage to show everyone who is the current holder of the mortgage. I don't believe there is a law that requires a lender to record an assignment of mortgage, or to record it within a set amount of time. However, in order to foreclose a mortgage, a lender must record an assignment of mortgage prior to the start of the foreclosure, otherwise the foreclosure would be invalid.

There is an exception to this. Many mortgages are held by a company called MERS (for Mortgage Electronic Registration System). MERS holds the mortgage in trust for whoever holds the note. So in Massachusetts, when MERS holds the mortgage, there is no need to record an assignment of mortgage when the note is transferred from the lender to the investor. That's because MERS holds the mortgage for whoever holds the note.

Finally, it is important to remember that real estate law varies considerably from state to state. Court decisions, statutes or articles interpreting real estate law of other states have little applicability to the law in Massachusetts.