They amended the UCC in 2001. Here’s part of what it says:
§ 9-203. Attachment and Enforceability of Security Interests; Proceeds; Supporting Obligations; Formal Requisites
*****
(f) Proceeds and supporting obligations. The attachment of a security interest in collateral gives the secured party the rights to proceeds provided by Section 9-315 and is also attachment of a security interest in a supporting obligation for the collateral.
(g) Lien securing right to payment. The attachment of a security interest in a right to payment or performance secured by a security interest or other lien on personal or real property is also attachment of a security interest in the security interest, mortgage, or other lien.
The comments say:
8. Supporting Obligations. Under subsection (f), a security interest in a “supporting obligation” (defined in Section 9-102) automatically follows from a security interest in the underlying, supported collateral. This result was implicit under former Article 9. Implicit in subsection (f) is the principle that the secured party’s interest in a supporting obligation extends to the supporting obligation only to the extent that it supports the collateral in which the secured party has a security interest. Complex issues may arise, however, if a supporting obligation supports many separate obligations of a particular account debtor and if the supported obligations are separately assigned as security to several secured parties. The problems may be exacerbated if a supporting obligation is limited to an aggregate amount that is less than the aggregate amount of the obligations it supports. This Article does not contain provisions dealing with competing claims to a limited supporting obligation. As under former Article 9, the law of suretyship and the agreements of the parties will control.
9. Collateral Follows Right to Payment or Performance. Subsection (g) codifies the common-law rule that a transfer of an obligation secured by a security interest or other lien on personal or real property also transfers the security interest or lien. See Restatement (3d), Property (Mortgages) § 5.4(a) (1997). See also Section 9-308(e) (analogous rule for perfection).
Under the revision, the same law applies to a sale of a mortgage as a security interest in it. You really don’t need to read these provisions though to see that the judge was just playing a game of “gotchya.” The rule requiring proof that you own the mortgage is designed to prevent the mortgagor from being required to pay the mortgage more than once. There is no danger of that happening if the proceeds of the foreclosure sale go into the trust for the bondholders who have a right to payment of the proceeds from the notes. As long as you know who ultimately is entitled to get the money, the fact that it’s ambiguous who the agent is ought to be beside the point. The agent isn’t representing himself anyway. He’s representing the bondholders.
I’m an attorney. I’ve foreclosed hundreds of mortgages, and I’ve defended foreclosures. I’ve also helped write some of the agreements that they use to securitize mortgages. Everytime I get one that is ambiguous as to who the proper party to sue might be, I try to fix it. It’s sometimes hard to convince lenders to change their form documents, which they’ve been using for years, though. As a practical matter, these ambiguities don’t prejudice the rights of the mortgagors. Personally, I don’t know why the attorneys handling the foreclosure did not simply get a new assignment and fix the problem. One answer is that some of these judges feel that not only must you show that you own the mortgage, but you must show that you owned the mortgage before you filed the lawsuit. And they don’t seem to understand that the recording of the assignment of mortgage is not important for that purpose. We’ve got a case here in Florida where the judge ruled that not only must the mortgagee prove that he had an assignment of the mortgage, but he must actually record the assignment before filing the lawsuit. It’s like they are going out of their way to find against the mortgagee.