Note that none of this acknowledges the requirement of the PSA that the note be endorsed to show the full chain of conveyance. Also observe the emphasis on ” These documents contain clear granting language that conveys ownership…”. The documents cannot alone convey ownership; the stipulated steps also have to be completed. The article does acknowledge the importance of delivery of the note in the following section, but again fails to address the PSA issues:
Physical delivery of the mortgage note to the purchaser or its agent, together with an endorsement of the note by the seller in blank, are also key components in the sale of mortgage loans for several reasons.
As we indicated, many PSAs required specific endorsement (to a particular party), not in blank, so this is inaccurate (except as far as describing “general custom”). The article repeats its assertion about endorsements in blank (note the section we boldfaced):
Notes may be delivered to the purchaser with an endorsement in blank. It is common for a mortgage note for a mortgage loan that has been sold to have stamped on it an endorsement to the effect of “Pay to the order of _____________, without recourse”, signed by the originator or a subsequent purchaser. Such an endorsement has the effect that any subsequent transfer of the note presumptively only requires physical delivery (i.e., with no additional endorsement). Therefore, where there are successive purchasers to a note, the endorsement in blank by any prior holder is a sufficient endorsement for purposes of the most recent purchaser.
As we indicated, that’s rubbish. The boldfaced language falsely claims that if the note was endorsed by A in the prototypical A-B-C-D chain we set forth earlier, then D could rely simply on the endorsement by A. In fact, the PSA required the full chain of endorsement and also required the depositor (the C party) endorse the note to the trustee (it is New York trust law requirements, not specified in the PSA, which would call for the final endorsement to be to the specific trust, not just the trustee).
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