Where should originals sit after a performing note closes, and does a blank endorsement change the answer

One reliable lesson about documents: the person who says the original will arrive within 30 days sends it in 90, or sends it never. If the bailee arrangement gets accepted, put a dollar consequence on the delivery date. A holdback, a price adjustment, something with teeth. Separately, a fireproof box in an office is fine right up until the office floods.

Asking the thing I'd skip in a room full of people: if the mortgage is recorded at the county with my name on the assignment, why does the paper original matter at all? The county record is public and permanent. What does the physical note do that the recording doesn't?

@jessreyes12, the two documents do different jobs. The recorded mortgage or deed of trust is the security instrument, and recording an assignment puts the world on notice of who holds the lien. The note is the debt itself, and in most states it is a negotiable instrument, so the person entitled to enforce it is generally established through possession plus a proper chain of endorsements. Recording the assignment does not by itself prove you hold the note.

An endorsement in blank makes the note enforceable by whoever holds it, which is exactly why possession and custody language matter. An allonge is the attached page carrying that endorsement, and it has to stay affixed.

@dmitri_248, on the bailee arrangement, the mechanism is common in institutional trades and it is not inherently weak. What it does is convert a possession question into a contract question, so the letter has to say who the custodian holds for, what happens on the seller's insolvency, and who bears loss. That last point is where most letters are thin.

Where a note goes missing, states provide remedies, often affidavits or proceedings to establish the right to enforce, and both the standard and how receptive courts are vary by state. Whether that path is workable for your specific loan is a question for a foreclosure attorney licensed in the state where the property sits.

What really drives your decision here is how likely you are to ever need to enforce. On a seasoned performing first with real equity, the enforcement path may never be tested. Price the custody risk accordingly rather than treating it as pass or fail.

A bailee letter is worth reading for exactly two sentences. First, who the custodian acknowledges it holds for after funding. Second, what happens if the seller files. If the letter says the custodian holds for the benefit of the purchaser without naming the buyer, that's a form letter nobody updated. On the blank endorsement, it's usually not worth fighting, take delivery and hold it as blank until sale. Pushing for a specific endorsement means the seller's counsel redrafts, which costs a week and buys a name on a page that gets struck through anyway. The 30 days is the part worth pushing back on. Delivery slips regularly because a custodian's release process needs a signature from someone who's left the company.

Price it. A custody defect on a performing first with a 60 something ITV and four years clean is worth maybe a point, because the odds of ever standing in front of a judge with that file are low. The same defect on a second at 90 combined calls for originals in hand before wire, no exceptions, because that file is far more likely to get tested. @dmitri_248, what's the ITV and the seasoning? That question doesn't have one answer across the whole spectrum of paper.

Mine are in a drawer. Not a fireproof drawer. I know.