Improper Assignment of Mortgage Leads to a Second Foreclosure

Case Overview

This case study examines the situation of an individual facing foreclosure on four properties in 2014. As a result of independently settling the mortgages on three of these properties, the individual avoided foreclosure, while a relative managed to settle the fourth one before the deadline.

Although the bank received these payments, the satisfaction of the mortgage was not issued as expected. As a result, it transferred the loans and mortgages to a third party—coincidentally, the same relative who had paid off the fourth property. Since the bank failed to notify the individual about this assignment, one of the properties was re-entered into foreclosure despite being fully paid off.

The bank is alleged to have failed to issue loan satisfactions on time, assigned mortgages improperly, and assigned a judgment incorrectly. Consequently, the individual had to fight foreclosure a second time.

Questions to the Banking expert and their responses

Can you describe your professional background in banking procedures, specifically the foreclosure process?

From my start with real estate in the mid-70s through my experience with savings and loans institutions and ultimately with commercial banks, I have gained a comprehensive understanding of banking procedures, particularly those related to the foreclosure process.

What responsibility does the bank have to issue timely loan satisfactions?

Banks are obligated to meet commercially reasonable standards when issuing loan satisfactions. Typically, this should be done within a week but certainly not more than 30 days after payment.

What is the duty of the bank to notify a client about the assignment of their loans to a third party?

The obligation of a bank to inform their clients about assigning their loans to a third party largely depends on the language used in relevant documents such as notes or contracts. However, commercially reasonable banking practices suggest that well-run banks would notify an individual or entity impacted by such an assignment, regardless of what these documents state.

About the expert

This expert brings over 35 years of banking experience, with a focus on real estate, lending, and banking practices. They hold an active real estate license in Florida, and are a licensed FINRA broker, and an active member of the American Banker Association. Their extensive career includes roles as senior vice president for a major bank, director of commercial real estate at another prominent financial institution, head of due diligence for a private equity fund, and currently as the principal of several private investment banking and advisory firms.