It's hilarious how people can't distinguish between "mortgage assignment" and "mortgage assumption."
Of course "assignment" is not "assumption."
"Mortgage Assignment" is a hybrid of the All Inclusive Trust Deed, without the "all inclusive" element. It's not illegal to do. However, it does involve the simple transfer of the deed to the buyer subject to the existing loans.
The person most at risk here is the seller. It's can be a bad idea to transfer title to someone with shaky credit. Of course it depends on "why" the credit is bad, and "what" is bad about the credit. If the buyer simply doesn't pay his bills, that's one thing. If the buyer has one or two solvable credit issues stemming from a one-time event, that's something different.
In the case we're talking about, the seller want's the Buyer to have some skin in the game, thus the $6k or so.
Meantime, these are transactions that done only by professional investors as a rule. Otherwise, a transfer of a deed to a person with bad credit, who is going to live in the house, is a bad move by the seller (not the buyer). The seller has everything to risk.
Normally, when an investor takes over a loan, and takes title to the property, he then resells the property, but escrows the buyer's title until the buyer pays off the loans. At the same time, the investor stays with the deal, to protect the seller from loss.
Meantime, taking title subject to the existing loans such as what happens with an All Inclusive Trust Deed, the bank reserves the right to call that loan on the property that changes hands. However, unless there is a likelihood of the bank making more money off the loan (with higher rates, etc), the bank is happy that the loan is just being paid, and doesn't care whose paying it.
Again, a "mortgage assignment" bears no relationship with "mortgage assumption." NO "formal" assumption is taking place. It's more of a trust relationship between a seller and a buyer. If the seller trusts the buyer to make the payments on the loan, and is willing to transfer title, then the transaction is fairly identical to an All Inclusive Trust Deed, except that most likely the seller is not wrapping any equity with the existing loan, but simply deeding the property to the buyer in return for a small amount of cash in return for the deed. It's a common practice, but as a professional investor whose primary business is Subject To investing and merchandising, I would want more than $6k for the hassle.
That's my take.
BTW: No real estate agent is going to recommend this transaction, and fewer can make the distinction between "assignment" and "assumption" as has been shown on this thread.
If you would like more information on pros and cons of "mortgage assignment" go to my blog at profitableinvestingstrategies.blogspot.com
Jay Palmquist - Professional Sub2 Investor