A Collateral Assignment of Rents agreement is used when a landlord seeks to place a mortgage on a property subject to a pre-existing lease. In such situations, a lender will typically ask that the lease payments serve as collateral, in addition to the property itself. The document allows the borrower/landlord to continue to collect and hold rents as long as it is current on it’s loan payments. If the borrower goes into default, the document allows the lender to seek rent payments directly from a tenant to satisfy the landlord’s delinquency.
Documents to be prepared for you: “Follow-Through” Instructions, Collateral Assignment of Rents.