How do states treat a mortgage without a note?

😀 Real Property • Security Interests in Real Estate PROP#207

Legal Definition

In some states, the transfer of a mortgage automatically passes the note (unless expressed otherwise), while other states hold that a transfer of the mortgage without the note is void.

Plain English Explanation

When you "get a mortgage," you don't deal with a single document. Mortgages involve two documents. The obvious one is the mortgage document, but people often forget there is also a promissory note (referred to simply as the "note") that contains all the important details regarding repayment. In other words, the "note" contains information like the name of the borrowing, the address of the property, the interest rate, payment details, amount of loan, and term of the loan. Additionally, the note is not recorded. In contrast, the "mortgage" contains information enabling its holder to take possession of the property if the note is not paid. It holds the security interest and is recorded.

Since parties are allowed to transfer their interests in mortgages, states have to deal with what to do when these two important documents get separated. In other words, what happens when a mortgage and a note are attempted to be separated. Some states deal with this by simply assuming that the mortgage will always, and automatically pass with the note. So when Amy transfers her note to Bob, Bob will automatically receive the mortgage too unless Amy specifically chose not to give him that.

However, other states follow a rule where the transfer of a mortgage without the note is void, meaning it is not possible to transfer the mortgage without also transferring the note, and any attempts to do so are simply ignored.

Related Concepts

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