The real estate finance industry has seen many loan assignment transactions in the marketplace, ranging from large portfolio transactions to the sale and transfer of individual loans. This article reviews the rights and liabilities of borrowers and lenders after a loan assignment takes place and, accordingly, reviews some typical and not-quite typical situations that have arisen after such assignments occur. Recent cases establish that after an assignment takes place, a loan assignor no longer has any rights under the loan documents, although the assignor may have common law rights to recover damages. Conversely, from the perspective of a loan assignee, the assignee only has the same rights and/or defenses as the assignor had against a borrower or other party.
Assignor Rights
In a typical assignment scenario, a mortgage assignor will agree to transfer the assignor’s rights and interests under a loan transaction to the assignee thereby seeming to forego any right the assignor might have to enforce the mortgage for its own benefit. There have, however, been instances in which an assignor subsequently tries to bring an action against the borrower under those same assigned loan documents. As the following cases illustrate, while the assignor lacks standing to bring an action under the loan documents once the assignment has occurred, courts have held that the assignor may proceed under common law causes of action even though there is no claim permitted under the loan documents previously transferred.
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