When The Borrower Asks For An Assignment Of Mortgage
This is one of the more common questions we are asked by servicers regarding mortgages in New York: “The borrower is refinancing his mortgage and when he pays us, he wants an assignment of the mortgage instead of a satisfaction. Do we have to give it to him?”
The quick answer is no, it is not required, although you might wish to do so-and charge an appropriate fee. A recent case in New York discusses the topic anew, reviews a number of concepts and therefore captures our attention. [767 Third Avenue, LLC v. Orix Capital Markets, LLC, 26 A.D. 3d 216, 812 N.Y.S. 2d 8 (1st Dept. 2006)]
Here is the background that will help you decide what to do.
First, the main reason borrowers ask for an assignment is to save mortgage tax. In any event, there is no question that when a borrower pays off a mortgage, the servicer must issue a satisfaction, and quickly, or suffer a monetary penalty. While one of the controlling statutes in New York (RPL §275) mandates the satisfaction, it does not oblige substitution of an assignment.
Nonetheless, case law has carved an exception which must be understood. Where a borrower is in foreclosure, if the only way to redeem the mortgage- pay it off- is to obtain an assignment of the mortgage, then a court can order that. But where it is merely permissible, the servicer retains a choice.
For business or public relations purposes, or just to be gracious, the servicer can choose to issue an assignment. Whether prepared in-house or with outside counsel, there are costs attendant to generating the document and so the appropriate fee can be charged. Finally, for the very reason that the servicer is not bound to issue an assignment, the new case confirms that it is not economic duress to demand the fee.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.