A developer in Hawaii wants to sell units in a new residential condominium project and offer seller financing to buyers using mortgages. After the developer sells all units, it wants to sell its portfolio of mortgage receivables to a secondary market investor. Which of the following correctly describes the mechanism by which the developer transfers the mortgages to the investor in Hawaii?
Correct Answer
A) The developer executes an assignment of mortgage for each loan, transferring the mortgage lien and the associated promissory note to the investor
In Hawaii, mortgages are transferred from one party to another through an assignment of mortgage. The assignment transfers both the mortgage lien (the security interest in the property) and the associated promissory note (the evidence of the debt) to the new holder. This is how mortgage loans are sold to secondary market investors (such as Fannie Mae, Freddie Mac, or private investors). The assignment must be recorded to provide constructive notice of the transfer.
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Related Topics & Key Terms
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Related Concepts
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
Usury is the practice of charging an interest rate that exceeds the maximum rate permitted by state law. Usury laws protect borrowers from excessive interest charges on loans.
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs available to eligible veterans, active-duty service members, and surviving spouses. It offers no down payment and no private mortgage insurance requirements.
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