“All liens must be properly registered against the property in which they encumber (called actual notice or notice to the world that there is a lien against real property - this dates back to 17th century property laws)”
The purpose of recording liens is to protect innocent third parties from purchasing encumbered property. It is not required to make a lien enforceable against the original party.
I will agree that modern-day securities are beyond Recorder procedures but I am not sure it is required once the original lien is recorded on the property and there is no discharge as yet filed.
As to whether a discharge is invalid, the issue would be the real creditor. Whomever or whatever holds the legal right to payment of the lien (and that isn’t always the original lender if the mortgage has been assigned to another party) is the proper party to give a discharge.
If the original loan agreement reserved the right in the lender to assign the note to another party, no borrower can avoid the debt solely because of the assignment. And since the usual mortgage deal also guarantees an assignment cannot change the material terms of the original loan agreement, the borrower has no cause to complain. Now, if it is assigned and material terms are changed (e.g., a simple change of payment address or party isn’t a material change, it requires something like a change in the payment amount or term), then the borrower would have a right to complain.
But if you want to argue that mortgages cannot be legally assigned without recording, I think you are in error. So long as there is notice a lien exists on a property and there is no recorded discharge, all innocent third parties are on notice to investigate further before investing in the property. And that is the only purpose of the recording laws.
Hi caseinpoint,
If you don’t mind let’s dissect this carefully because it’s very important. I don’t have all the answers and you genuinely seem to show an interest.
I have a friend who is a title examiner and real estate expert that has some technical knowledge that could add some value here.
Trying to get him to join FR. Let’s see if we can figure this out.
Qui-Tam
State of Tennesse v. MERS