In one sentence
An assignment of a right or asset to a lender as security, exercisable if the borrower defaults.
The longer version
Collateral assignments pledge specific rights, contracts, permits, interest rate caps, to the lender as additional security. They broaden the lender's recovery beyond the real property itself.
Each assignment may need counterparty consent and becomes part of the collateral package the closing documents.
Common questions
- What is a collateral assignment?
- An assignment of a right or asset, such as a contract, policy or account, to a lender as security, exercisable only if the borrower defaults.
- How is a collateral assignment different from an outright assignment?
- An outright assignment transfers the right immediately. A collateral assignment leaves it with the borrower until default.
- What gets collaterally assigned in real estate loans?
- Commonly leases and rents, construction and management contracts, interest rate caps, and sometimes permits and licenses.
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