ALBUQUERQUE, N.M. — New Mexico has begun warning financial institutions to stop marketing deeds of trust as mortgages because the two are separate legal instruments with significantly different potential consequences for borrowers.
The Attorney General’s Consumer Protection Division last week notified 11 lenders — including some of the nation’s largest banks — that the practice may violate the state’s Unfair Practices Act and the Home Loan Protection Act.
The violations would affect most harshly those borrowers who default on their home loans but could also significantly impact people transferring home loans in divorce proceedings, following deaths, or in quit-claiming residences.
A mortgage lien, the traditional instrument used in most home purchases in New Mexico in the past, gives a lender the legal protection to foreclose on a loan in the event a borrower should default, said Assistant Attorney General Karen Meyers. But the law also provides due process for the borrower, requiring judicial approval of all foreclosure sales.