- The first time a mortgage is assigned is when it is first created. In this instance, it is assigned to a borrower. This simply means the contract binds the borrower to the terms of the mortgage as agreed by both parties. It is an easier way of saying that the borrower is responsible for paying off the mortgage and is subject to penalties that occur when the mortgage is not paid. This becomes important during legal processes, when identifying the borrower can be important -- especially in commercial mortgages.
- A mortgage can also be assigned to the lender. The first lender is the organization that created the mortgage and loaned the money, but the process can become complex. Many lenders sell mortgages to other lending organizations. Sometimes the mortgage is reassigned to the new lender, but, at other times, the first lender still services the loan while selling the debt obligation to the new lender. In many cases, the borrower will not even be aware the mortgage has been assigned to a new lender, if the previous lender still has a role in the management process.
- Mortgages also can be assigned to a new borrower in some circumstances. This is known as assuming a mortgage, an option for a borrower who wants to "sell" the house but does not want to list it on the market and needs to leave it quickly. In this case, a buyer can agree to take over a mortgage and pay the borrower directly for the house's remaining equity. This can allow the buyer to take possession of the home for much less money than a normal purchase would require.
- Assuming a mortgage may seem like a great deal for the buyer, but it rarely occurs. Lenders are seldom willing to reassign a mortgage to a new borrower, and when it is willing, it will do so only if the new borrower has credit that's at least as good as the original borrower's. Buyers also may prefer to get new mortgages instead of assuming existing ones that have worse mortgage rates or other issues.
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