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Don asked in Business & FinanceCorporations · 7 years ago

Is a mortgage Note Holder...?

the Lender or the acting Lender?

I see on the documents, Lender in quotes or written "as Lender".

Update:

TM, the holder of the note would be the Note Holder. The Note holder holding the note becomes the Lender?? Or is the Note holder "acting as" a Lender?

Update 2:

TM, concerning the mortgage Note being an asset that can be bought and sold ....Why is the Note Holder or the "acting as" lender selling the homeowner's mortgage note as if it originated from the Note holder and not the Homeowner?

The promise to pay or mortgage note is the asset of the Homeowner, not the Note Holder. Why are they selling homeowner's asset as if it was their asset?

I found no evidence written on the mortgage documents indicating any type of value (or money) was given towards a loan.

Wells Fargo stated the homeowner is financing "debt". Debt is the opposite of money.

Update 3:

The homeowner's own energy and labor is the value backing the Homeowner's Mortgage/promissory Note.

Since the value is coming directly from the homeowner (not indirectly from Business profits)... What else is being sold and transferred along with the Note?

2 Answers

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  • 7 years ago
    Favorite Answer

    The Mortgage Note (or the "Note") is the evidence that you (the borrower) owes money to the lender and grants the lender the right to foreclose on the property if you (the borrower) fails to pay (defaults on the loan).

    Therefore, the holder of the Mortgage Note is the lender. The Mortgage Note is an asset that can be bought and sold countless times. If ABC Bank holds the note, then ABC Bank is the lender. If ABC Bank sells the Note to XYZ Bank, then XYZ becomes the lender. If Bob and Sue buy the Note from XYZ Bank, then both Bob and Sue are the lenders since they hold the Note.

    UPDATE

    Hi Don - I'm getting a little confused by your updates. Let me describe how the Mortgage Note works and you can see if this fits the situation you're describing.

    As far as the "acting lender," I have never heard that term. The only thing I can think that that would apply to is the Mortgage Servicer who acts as an Agent to the Lender (the holder of the mortgage note). The Mortgage Servicer is the company to whom the borrower makes the payments, sends out bills and notices, etc. The servicer works on behalf of the lender/investor and represents the lender/investor to the borrowers.

    Ok, here is how mortgages work...

    Albert wants to buy a house. He gets a loan from ABC Mortgage for $100,000 with an annual interest rate of 5% for 30 years. Albert signs a Mortgage Note that pledges that he will pay back ABC Mortgage according to the terms described until the balance is $0.

    So 3 parties RECEIVED something and GAVE UP something:

    1. ABC MORTGAGE (THE HOLDER OF THE NOTE)

    1A. ABC Mortgage RECEIVED a Mortgage Note from Albert which guarantees that they (the holder of the Note) will receive 5% interest every year on that money until the loan is paid in full. ABC Mortgage will receive regular monthly payments for 30 years from Albert until the loan is paid off.

    1B. ABC Mortgage GAVE UP $100,000 in cash.

    2. BOB (THE SELLER OF THE HOUSE)

    2A. Bob (the seller of the house) RECEIVED the $100,000 from ABC Mortgage.

    2B. Bob (the seller of the house) GAVE UP ownership of the house. He doesn't own it anymore.

    3. ALBERT (THE BORROWER AND BUYER OF THE HOUSE)

    3A. Albert (the borrower and buyer of the house) RECEIVED the ownership of the house. The house now belongs to him.

    3B. Albert (the borrower and buyer of the house) GAVE UP a pledge to pay 5% annual interest on $100,000 over 30 years (this pledge takes the form of a Mortgage Note). If Albert violates the pledge, then the holder of the Mortgage Note (aka, the lender, ABC Mortgage) can take away his house in order to recover the money that Albert still owes them.

    I hope that makes sense so far.

    If ABC Mortgage wants to SELL the Mortgage Note (which belongs to THEM; not to the borrower, Albert), then they can do so. So let's say Albert pays the loan down from $100,000 to $85,000 over 5 years. ABC Mortgage has received 5% interest on their money for the last 5 years. Now they want to sell the Mortgage Note (which belongs to ABC) to XYZ National Bank.

    Let's say XYZ buys it for $85,000 (since only $85,000 remains on the balance). Now XYZ owns the Mortgage Note. Albert (the borrower) still owes $85,000 at 5% annual interest for another 25 years. Albert owes this money to anyone who holds the Mortgage Note (which is now XYZ National Bank). So XYZ National Bank contacts Albert and says, "We now own your Mortgage Note so send your payments to 123 Main Street." So Albert sends the money to XYZ instead of ABC.

    The mortgage servicer (which hasn't been mentioned yet) is a company that the lender/investor/holder-of-the-note can hire to deal with their borrowers. So let's say XYZ National Bank doesn't want to deal with Albert directly (since they have so many borrowers). XYZ hires Goodman Loan Servicing to "service" their mortgage loans. So now Albert will send his monthly payment to Goodman Loan Servicing. GLS will take the money and send it to XYZ (holding back a little for their fee). If Albert stops making his payments, then GLS (not XYZ) will contact him and ask him what's going on. In this way, GLS is the ACTING LENDER on behalf of the real lender (XYZ National Bank).

    The Promise to Pay or Mortgage Note IS NOT the property of the borrower/homeowner. It belongs to the lender. The Note is the EVIDENCE that the homeowner owes them money. The Note is the asset of the lender (not the homeowner).

    The mortgage documents indicate what the borrower (presumably you) owe to the lender. If the loan is sold from lender to lender 100 times, those transactions have NOTHING to do with the original transaction between the original lender and the borrower/homeowner.

    Does all this make sense now?

    Source(s): 25 years as a Management Consultant and Project Manager in the Mortgage Banking Industry.
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  • Anonymous
    7 years ago

    I use STAR FUNDING GROUP when I want to sell my notes go to http://www.starfundinggroup.com good luck.

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