Also known as: endorsements · indorsement
Written by attorneys · grounded in primary & secondary sources — see below
A signature or writing on a negotiable instrument that transfers the right to enforce the obligation the instrument secures. The transfer keeps the mortgage and the underlying obligation together unless the parties expressly agree otherwise.
Edgewater Capital originated a mortgage loan to Evelyn Ellison secured by a promissory note. Edgewater later sold the loan to Evergreen Bank by delivering the note with a blank indorsement and recording an assignment of the mortgage. When Evelyn defaulted, Evergreen Bank enforced the note and foreclosed on the mortgage because the indorsement transferred enforcement rights along with the obligation.
First Bank originated a note to borrower Dana Price secured by a mortgage. First Bank sold the package to Second Bank by delivering the note bearing a blank indorsement. When Dana defaulted, Second Bank sued on the note and foreclosed because the indorsement had transferred enforcement rights.
Select any source to read its text and confirm it supports the definition.
Lender Alpha assigned a promissory note to Lender Beta by special indorsement and delivered the instrument. Beta later enforced the note against maker Carl Quinn after default. The indorsement established Beta's right to enforce the obligation secured by the accompanying mortgage.
Creditor Delta pledged a mortgage note to secured party Epsilon by indorsement and delivery. When the underlying borrower defaulted, Epsilon enforced the note. The indorsement transferred enforcement rights while keeping the mortgage lien attached to the obligation.
Originator Gamma sold a mortgage loan to purchaser Zeta but omitted any indorsement on the note. Zeta could not enforce the instrument after borrower default because no indorsement had transferred the right to enforce the secured obligation.
Bank Iota transferred a note and mortgage to Bank Kappa via indorsement and assignment. After the borrower defaulted, Kappa foreclosed. The indorsement ensured the mortgage stayed with the obligation rather than becoming a worthless separate lien.
The transfer of the obligation automatically transfers the mortgage as well unless the parties agree otherwise. This rule prevents the note from becoming unsecured and avoids an economic windfall to the mortgagor.
Supporting sources
An indorsement is typically placed on the instrument or an allonge, but the controlling principle is that delivery with intent to transfer enforcement rights moves both the note and the mortgage lien together.
Supporting sources
Yes. The presumption that the mortgage follows the obligation can be overcome only by clear evidence that the parties expressly agreed to sever the two rights at the time of transfer.
Supporting sources
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