I have a promissory note, stamped and signed as follows:

Pay to the order of Mortgage Co. X, without recourse mortgage Co. Y and signed by President of company and E.V.P.

also shows: Pay to the order of _____________without recourse, Mortgage Co. X

signed by president and C.F.O.

Mortgage Co. Y claims they are holder in due course.

My understanding of without recourse is that mortgage co Y has sold to Mortgage Co. X and has not further rights to future monies, or rights to note.

Am I reading this correctly??????

sideoutshu

ok....lets see if I remember correctly from the bar exam.....

I holder in due course is someone who:

takes for value, in good faith, and without cause to question its legitimacy(ie: forgery, claims against, etc.)

what are the circumstances surrounding the transfer?

mr.yet

WHOM IS THE HOLDER OF THE NOTE IN ORDER TO ENFORCE IT.

barbarianjeff

Answer to MR YET... MORTGAGE COMPANY "Y" SELLS TO MORTGAGE COMPANY "X" WITHOUT RECOURSE. THIS MEANS THAT PURCHASING MORTGAGE COMPANY X CANNOT GO BACK TO SELLING MORTGAGE COMPANY "Y" FOR THEM TO PAY ANY DEFICIENCY IN PAYMENTS CAUSED BY THE BORROWER GOING INTO DEFAULT ON ITS PAYMENTS UNDER THE TERMS OF THE NOTE. THIS IS GOOD FOR THE SELLER OF THE NOTE AND BAD FOR THE BUYER OF THE NOTE.


IF THE NOTE SAID "WITH RECOURSE", THEN THE PURCHASER OF THE NOTE CAN LOOK TO THE SELLER WHO SOLD HIM THE NOTE FOR ANY DEFICIENCY IN PAYMENTS CAUSED BY THE BORROWER NOT PAYING HIS OBLIGATIONS. THIS IS BAD FOR THE SELLER AND GOOD FOR THE BUYER.

HOPE THIS HELPS.