Transfer and Enforceability of Mortgage Notes
On November 14, 2011, the Permanent Editorial Board for the Uniform Commercial Code (the “PEB”) issued its Report on the “Application of the Uniform Commercial Code to Selected Issues Relating to Mortgage Notes” (“the Report”). You can view and download a copy of the Report here
While the Report does not address all of the rules in the UCC relating to enforcement, transfer, and ownership of mortgage notes, it reviews the rules relating to four specific questions:
• Who is the person entitled to enforce a mortgage note and, correspondingly, to whom is the obligation to pay the note owed?
• How can the owner of a mortgage note effectively transfer ownership of that note to another person or effectively use that note as collateral for an obligation?
• What is the effect of transfer of an interest in a mortgage note on the mortgage securing it?
• May a person to whom an interest in a mortgage note has been transferred, but who has not taken a recordable assignment of the mortgage, take steps to become the assignee of record in the real estate recording system of the mortgage securing the note? Excerpt from The Report, page 3.
Please Note: The Report applies in its entirety to the 1990 and 2002 texts of the UCC. New York, however, has not adopted either of those revisions. The PEB points out that “much of the analysis of UCC Article 3 in this Report also applies under the older version of Article 3 in effect in New York, although many section numbers differ. The Report does not address those aspects of New York’s Article 3 that are different from the 1990 or 2002 texts.” The Report, page 2, footnote 3.