What Is an ASGT Deed of Trust?

Your mortgage lender can change.

Your mortgage lender can change.

ASGT is a code that's attached to deeds of trust to signify that they were assigned to another party. Used in some states instead of mortgages, deeds of trust are the actual legal documents that back home loans to protect lenders and let them foreclose and take the home. When a lender sells a loan, it gives its right to foreclose to the new owner of the loan by assigning the deed of trust.

Security Instruments

Trust deeds and mortgages are called security instruments. When a bank gives you a loan, you usually promise to pay it back by signing a promissory note. If you don't pay the loan, the bank can ultimately sue you to force you to pay. However, the bank can't be sure of what it will get when it goes to court. When you sign a security instrument, though, you promise to let the bank take the property named in the agreement -- your house, in the case of a home loan -- if you don't pay. It still has to foreclose, but it goes into the process with your agreement to let it take your house and generally doesn't have to get a traditional judgment.

Trust Deed vs. Mortgage

When you buy a house with a loan secured by a deed of trust, you technically don't own the house. You get to move into the house and you can sell it whenever you want, but the title sits in the hands of a third party called a trustee. As long as you pay on your loan, the title stays there until you pay off your home and the trustee gives you the title. If you don't pay, the bank forecloses and the trustee gives the title to the bank. With a mortgage, there is no third party. The bank sits on the title of your home with you and gets to take it over if you don't pay and it forecloses.

Why Loans Get Assigned

Lenders sell loans so they can get their money back and relend it. Some mortgage lenders are just in the business of making loans, selling them, pocketing the fees and doing it over and over again. Traditional banks have the choice of holding their own mortgages or selling them and will do either, depending on their particular strategy.

Home Loan Assignment Process

Depending on the type of home loan, the assignment process can be very complicated. Many loans first get sold to a guaranteeing agency like Fannie Mae or Freddie Mac. That agency groups loans together into pools that are turned into bonds. It adds a promise that if you don't pay your mortgages, it will step in and pay the investor. Those bonds are sold on Wall Street to investors who all share in your payments and in the protection that comes from your deed of trust or mortgage. Along the way, another company, called a servicer, gets involved to collect your payments and send them out to the investors. If something goes wrong, it's the servicer -- or, in some cases, another company called a special servicer -- that will foreclose under the assigned deed of trust.

 

About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

Photo Credits

  • Jupiterimages/liquidlibrary/Getty Images