Also known as: mortgage markets
Written by attorneys — see sources below.
The national market in which mortgage loans are originated by lenders to borrowers. It also encompasses the secondary market in which existing mortgages and their associated obligations are transferred from one holder to another.
Harborview Development borrowed from Seaside Life Insurance and gave a mortgage on its project to secure the note. Seaside later assigned the note to Skyline Capital and the mortgage instrument to Bayfront Realty in separate documents. When Harborview defaulted, Skyline enforced the obligation and foreclosed because the mortgage followed the note to the same hands in the secondary mortgage market.
The subprime mortgage market collapse wiped out household wealth and triggered widespread defaults. Congress responded by creating an agency to oversee consumer financial products. The agency’s structure later faced constitutional challenge in litigation over its single-director leadership.
Following the 2008 financial crisis, Congress created the Consumer Financial Protection Bureau as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The agency was tasked with implementing and enforcing a large body of federal consumer financial protection statutes, including the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, and the Truth in Lending Act, along with a new prohibition on unfair, deceptive, or abusive acts or practices in the consumer-finance sector. The CFPB is led by a single Director appointed by the President with the advice and consent of the Senate for a five-year term, during which the President may remove the Director only for inefficiency, neglect of duty, or malfeasance in office. The agency receives its funding directly from the Federal Reserve rather than through the annual appropriations process. In 2017, the CFPB issued a civil investigative demand to Seila Law LLC, a California-based law firm that provides debt-related legal services to clients. The demand sought information and documents related to the firm’s business practices to determine whether Seila Law had engaged in unlawful acts or practices in the advertising, marketing, or sale of debt relief services. Seila Law asked the CFPB to set aside the demand on the ground that the agency’s single-Director structure with for-cause removal protection violated the separation of powers. When the CFPB declined, Seila Law refused to comply, and the CFPB filed a petition in federal district court to enforce the demand. The district court rejected Seila Law’s constitutional challenge and ordered the firm to comply with the demand. The Ninth Circuit affirmed, concluding that Seila Law’s arguments were foreclosed by Humphrey’s Executor v. United States and Morrison v. Olson. The Supreme Court granted certiorari to address the constitutionality of the CFPB’s structure and, if necessary, the severability of the Director’s removal protection from the remainder of the Dodd-Frank Act.
View caseThe primary market is where lenders originate new mortgage loans to borrowers. The secondary market is where those existing mortgages and obligations are transferred from one holder to another.
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Separating the right to enforce the obligation from the mortgage renders the note unsecured as a practical matter. This outcome produces economic waste and gives the borrower an unwarranted windfall, so the law presumes the mortgage follows the note unless the parties clearly agree otherwise.
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No. Standing to foreclose turns on who holds the enforceable right to the debt. Transfer of the note carries the mortgage with it even if the mortgage assignment is not recorded or is made to a servicer.
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Absent clear evidence that the parties intended to disassociate them, the mortgage follows the note. The holder of the note therefore obtains the right to enforce both the obligation and the security interest.
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