Does your Lender Have the Right to foreclose?

[UniqueSituation]

I have read in several different places, including on the Home Page of this site, there are accounts of homeowners "delaying" foreclosure by asking the Lender to provide proof they hold the original (blue ink) note.

From what I understand, since most notes are sold, resold and resold, there is a poor record keeping system and the original note gets lost in the process somewhere.

The question then becomes, when the homeowner gets foreclosed on, does the entity foreclosing on them have the legal right to foreclose?

When does one ask the Lender the question, "can you show me proof that you own my note?"

If they are foreclosing, shouldn't they at least prove they are the true owners of the note?

I cannot find any reference to the answer anywhere. I also cannot find an attorney in my area (Northern California) who is even aware of these situations.

Any insight to this would be helpful!

Thanks!

[Maurice Bedard]

Have you tried asking your question to the real estate attorney on the home page of the forum? They might be able to answer the question for you........

[UniqueSituation]

Yes, I called the number listed. The person I spoke with had not heard of that before. They said they were only aware of looking at your loan paper work and seeing if any predatory lending had occurred.

I mentioned what I had seen on the home page and they didn't seem aware of it.

I then started calling attorney's in my local area and got the same response. No one seems to be aware of this.


But I would still like to hear from others.

Thanks!

[UniqueSituation]

Cat,

The Lender & Loss Mitigation link on the Home Page doesn't seem to be working today. Is it just me?

Thanks!

[Maurice Bedard]

I am not sure...........what lender are you looking for and maybe I can help?

[UniqueSituation]

Indymac Bank

Thanks!

[Maurice Bedard]

IndyMac Federal
Loss Mitigation
1-877-908-4357

[UniqueSituation]

Thanks again.

Any other suggestions regarding the lender having the right to foreclose and how to find out more about that?

Thanks!

[Maurice Bedard]

Here is an interesting post that Moe had made regarding an article on this that might help to answer some of your questions...........but apparantly it is extremely costly to fight............I know I wouldn't have that kind of money to keep up a fight like that.............

Someone Has Been Trying to Foreclose on Joseph Lent's Boca Raton Home FOR FIVE YEARS!!!

[UniqueSituation]

Wow! Perhaps not really worth the trouble. The only reason I brought this up was I heard that if the lender really doesn't have the paperwork (and really doesn't own the loan), the real bank can step up at a future date and try to go after you again. But I would imagine common sense would set in at that point and they couldn't go after you twice for the same house.

Thanks!

[cactus77727]

I was wondering about the same thing regarding "Make them produce the Note".

My mortgage note is with it's third company. It went from Plaza Mortgage, to Avelo Mortgage, to Litton Loan servicing within two years.

Disclaimer: the following is pure fictional fantasy...
In my wildest dreams... we'd go to the judge or trustee when they file foreclosure and ask them to prove that they even own the Note on the home. If they don't cough up the Note within 30 days, the county recorder then titles the house over to me free and clear. No ticky, no laundry.

Isn't it funny how as citizens, if we don't have our paperwork we're screwed. Weather it's your drivers license, passport, school transcripts, title and registration, proof of insurance, and on and on...

[RedSoxFan]

While that's a great delay tactic and could prove incredibly useful to help you secure the time you need to find a solution, it will not eliminate the foreclosure threat and magically undo/erase your mortgage.

As far as originals go, I believe there are contingencies that alllow a copy to suffice in the event the original is lost or destroyed for just about every type of contractual document. While I'm sure someone out there can come up with one or two unreplaceable/unsubstitutable documents, besides HH/H or bearer bonds which are no longer issued. Nowadays, stock certificates, car titles, travelers checks, previously recorded deeds, passports, are all required to be "tracked" - owner info, transaction dates, etc. so if you do lose the "piece of paper" you're not losing the accompaning asset as well.

A resident of CA or LA should not be prohibited from selling a vehicle he owns outright if the title was destroyed in a fire or flood, right? Then it seems only fair that a lender be legally able to foreclose without the original note AFTER they follow the proper procedure for attaining a substitue for the original document just as we would for a lost stock certificate ora birth certificate.

the only real solution is for the regulators to improve transparency and thereby improve disclosure and only then we will get back to putting people in loans they can actually afford.

Hopefully Blair's plan will be the basis for O'Bama's bail out plan for homeowners. it seems to be geared to help almost ALL homeowners, not just those who can prove their income (afterall, mortgages weren't given only to those who could prove their income) and she's touting a simple process for all homeowners to follow regardless of lender or state. while it's not going to save every person's home, let's face it, no such bailout exists...........you'd need to be an auto manufacturer for that to happen

[925girl]

Mortgage Law Network, a web page I subscribe to has mentioned it. The idea is floating. I thought I read where a lawyer is suing class action for foreclosed parties already evicted, and I forget what state. I think it's a logical argument although I don't get why it's not getting the usual ink. I would think it could be used as a stall at the least. Above post sounds right. I think it might be useful in certain situations but not a blanket for most of us. Until there are more foreclosures I think folks like us are considered the few, as you may have noticed in your own dealings; some people just don't get it. It is somehow morally wrong or whatever is in the mind of the beholder. I know I've felt the vibe or maybe I'm just imagining it.

[ProfessorShays]

UniqueSituation raises an interesting point when he asked, "I have read in several different places, including on the Home Page of this site, there are accounts of homeowners "delaying" foreclosure by asking the Lender to provide proof they hold the original (blue ink) note."

Where this comes into play is when a lender seeks through court action to foreclose on a property owner. One of the allegations that must be raised in the complaint is the lender is the holder and owner of the promissory note and security instrument (typically a deed of trust or mortgage). A good defendant's counsel denies this allegation in the complaint. That denial forces the lender to prove the allegation at the time of trial. That can of course be challenging because assignments of the beneficial interest of the obligation are often not recorded and due to poor record keeping, there are problems.

This issue was challenged in 2007 in a Ohio Federal Court. The quote below that I lifted off a website explains the issue.

Daniel

In an October 2007 decision, Ohio Federal District Court Judge Christopher A. Boyko dismissed 14 foreclosure cases brought in front of the court on behalf of investors, due to insufficient proof that these investors owned the mortgages in question. Deutsche Bank National Trust Company, a trustee for securitization pools, was ordered to file copies of loan assignments to show ownership of the note and mortgage on each of the 14 properties as of the foreclosure filing date. The lender was unable to produce these documents, instead offering the court documents showing just the intent to convey legal rights in these mortgages, a substitute that Judge Boyko did not find to be acceptable under the law. Since this decision, dozens more foreclosure cases have been dismissed on the same grounds in Ohio, along with cases in New York, Florida, and Massachusetts.

Since these these dismissals have been without prejudice, meaning that lenders who can find the relevant paperwork can file the cases again, the relief for the homeowners is temporary. However, many lenders may become more willing to make arrangements with borrowers to avoid the foreclosure process due to these dismissals, saving themselves the legal entanglements involved. Also, the numbers of cases dismissed on such grounds is quite likely to multiply with so many loans on the market without proper paperwork, and more defendants beginning to challenge foreclosures on the basis of murky ownership records.

So, it seems that the complex web of mortgage and financial markets has entangled not just the borrower, but lenders and investors as well. Corners cut in the rush to profit have cast long shadows over the lives of home buyers and the investment markets, creating a mess that may take years to sort out. Restoring order and consumer confidence in the American economy may be a challenge that has been vastly underestimated by those financial experts who predicted a soft landing and quick recovery.

[RedSoxFan]

I guess the angle just seems "off point" to me. If you don't have the money to make your payments then where are you going to get the money to fund your legal battle? Lawyers typically require lump sums upfront to get started, right? Go class action? Easier said than done but ok, sure let's say you can. If you zoom out for second and take a peek from 30,000 ft., I think it’s pretty unreasonable to convince yourself that this is something you can win and that your mortgage will wind up being erased. Reminds me of when I buy a ticket for one of those huge Mega Millions jackpots – I spend the preceding time and up until the drawing enjoying blissful fantasies about what I’d do should I win. The bubble bursts by the time the last number is revealed and it’s back to reality. The only difference between the two in my mind, is the lottery ticket only costs a dollar and I only get caught up in the fantasy for a few days.

A homeowner goes to a closing, signs & monies are disbursed - no objection, challenge, dispute or protest. Payments are then made for several months or years in some cases, again without objection, challenge, dispute or protest. It isn't until the homeowner has difficulty making payments that this concept is suddenly subscribed to? So, there’s only a problem with what the lender did or didn’t do when the borrower isn’t able to pay on time? Doesn’t sound like a winning argument to me, what do you think? How about we ignore all that & take it a step further though, say the courts agree that the lender doesn’t have to right to foreclose b/c the original promissory note cannot be produced. Would you not agree that without question, the lender can easily produce sufficient evidence to convince a judge that the monies in question were not gifted to the homeowners but a loan with clearly outlined repayment plan? So the debt is owed but not secured by the property. What would be the next course of action for the creditor to take on a debt not being paid by the borrower? pursue a judgment, right? How long do you think that’s going to take? One appearance, two? Even if it was to take several months, interest & penalties are accruing (and legal fees generated by the lender- check your closing papers), it’s incredibly challenging at best to imagine any other outcome besides a judgment against you which would essentially mark the title of your current home and any future home you would try to purchase anyway. Throughout this whole process the mortgage is still recorded on title and without the release it cannot be ignored unless more than 50 years old and it is determined that there is no possible way to contact the lender or its agent. Thereby muting any quit claim effort or other strategy involving transfer of ownership to avoid linking the mortgage debt to the property. >>
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Even if you disagree with this theoretical path, at the end of the day, do you honestly think the courts are going to allow the floodgates to be opened on this issue? Borrowers across the country being allowed to walk from their mortgage debt b/c the original note cannot be produced? As borrowers we already sign a document at closing agreeing to sign anything else needed by the lender …….. if anything it will be another feather in the cap of reform and the procedures will be amended moving forward. Prob by simply requiring lenders to record the note prior to funding – problem solved as long as assignments/transfers are recorded properly & on time. Plus, what about the scope of E&O policies, seems like there are plenty of safety nets along the way to protect the lender's ability to collect on the debt. If they did anything thoroughly, it would be this, right? lol >>
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Banks & Lenders have operated shamelessly & behaved reprehensibly over the past decade or two and in many, many ways continue to do so and I’m not against them “getting theirs”, I just think this route only benefits the lawyers handing the case, not the homeowners. Shouldn’t they/we focus our energies and resources on improving the industry? Our mortgages are the single largest financial transaction most of us will make in our lifetimes – until the next purchase or refinance. Why not require disclosures on new loan products be approved BEFORE the product is “unleashed” on the consumer (ex. First generation pay option arms)? how about devising a better way to manage escrow balances and a better, more affordable policy that limits the amount a lender can increase your payment by to recapture escrow deficiencies? How about title insurance reform? Why can you increase coverage on every other insurance policy and simply pay for the increased coverage but when it comes to title insurance you have to buy a whole new policy? (pass the savings on lawyers!) You want to fix the housing crisis? Let EVERYONE refinance their existing loan (regardless of credit score, income, etc) into a FHA loan at 4.5% for 15, 20, 30 or 40 years and require everyone to escrow & pay mortgage insurance. Maybe make them assumable within the first 5 years if the potential buyer can qualify (document income, assets, etc.) Stability on a national level is the key to short term recovery with long term staying power. Letting 100 homeowners in Ohio, or wherever, walk away from their mortgages because of some legal loophole (that I don’t believe exists anyway) is not a solution, it’s more of the same. So, if you need to buy yourself time to negotiate a forbearance agreement, short sale, modification, whatever then this course would be a great delay tactic, just like filing bankruptcy or simply agreeing to whatever a lender’s wants regardless as to your ability to execute. These will all buy you time to increase your income, lower your overall debt, re-align your finances, negotiate a more affordable solution w/your lender but I highly doubt that simply losing the original note alone would ever be legally construed as an actual loss of the debt. is it reasonable to conclude otherwise?

[Ambling]

RedSoxFan... one of the most important reasons why a lender should be required to prove ownership of the debt is so the proper lender is making the decision to foreclose or negotiate a deal.

If your loan is sold to 4 different lenders and then the 2nd lender decides to foreclose, that's a problem.

Judges do allow lenders to get replacement notes... they'll get you eventually.

[RedSoxFan]

Ambling, no one is talking about 2 or 4 lenders making claim to a mortgage in this scenario. If that were the case then perhaps it would play a role. I would think that the assignments, recordings thereof or ultimately the financial records of what loans were sold to whom and the corresponding proof of transaction would be more important than who can produce the original promissory note. I'm merely petitioning that this day in age, a piece of paper by itself is not enough to erase a debt, however, I fully agree that it is another tool to be utilized to delay a foreclosure.

Also, I did not mean to infer that a judge would allow a lender to get a "replacement note" merely that there exists plenty of other documentation proving there is a debt and that a court/judge is going to allow someone to collect that debt.

"...they'll get you eventually...." not really sure what you mean but sounds kind of scary and threatening. be nice ambling, we're just sharing ideas & opinions for the greater good, right?

All I'm saying is that if you think you can get your mortgage erased because the lender can't produce the original promissory note then I think you're in for a really big legal bill and a really big surprise. Considering all the paperwork in a closing package, the attorney's minimum $1m E&O policy, required lender's coverage title insurance, optional borrower's title insurance, recorded docs, wire transfer, bulk sale & flow records, assignments, releases, etc. I think it's fair to say you'd be facing an uphill battle with no definitive case law on your side (at least not yet).

[UniqueSituation]

Ambling..... Correct! That was my main point. This whole situation for Borrowers, Lenders and Investors is a huge mess! I just want to make sure the appropriate entity is the one foreclosing so the web isn't tangled further down the road when the real holder of the Deed decides to step in.

RedSoxFan.... I do see your point, and of course foreclosure is eminent. I just want to make sure I am dealing with the entity that has the right to do it so I am not dealing with a much bigger problem down the road.

Good discussion points for all to consider.

[RedSoxFan]

nice follow up UniqueSituation and yes, good points all around.

to find your "true" lender the best course of action would likely be to follow the assignments. if, after contacting the lender referenced in the most recent recording, they tell you they sold or transferred your loan then they will typically provide you with an assignment (ink & seal) for you to bring to your town hall, registrar of deeds or equivalent to record (or request that they send you this). eventually you'll find the end of the trail and your current and only lender for this particular debt.

Likewise, backtrack the assignments to secure evidence that there is in fact only one lender/owner of the debt. If you discover that one is missing & you are unable to put together a complete chain of transfers that that would be something to dig in further on and be sure to contact your title insurance company immediately. they will work on your behalf (really the lender's if you think about it) for free and completely eliminate the possibility of the mortgage being collected (or any attempts to collect) more than once.

[UniqueSituation]

Thanks RedSoxFan.

That is exactly what I have been doing for the past 3 months and for some reason the title company is being really vague and never proactively getting back to me. I call on average once a week. Documents can't be found, still digging for them, who was it you spoke with last?, etc....

I know there are several issues with this loan. I have suspected that from the start. About 6 months ago a private investigator called me looking for the person who was my Seller/RE Agent/Mortgage Broker/ (all the same person - red flag) and the same person that made me go through his "friend" for the appraisal. His company(ies) have all since gone out of business and he is no longer in the US according to some friends who know "of" him.

I decided to send a QWR to my "known" lender. They have 60 days to respond.

It will be interesting to find out the outcome.

[RedSoxFan]

anytime UniqueSituation. it sounds like you have your hands full, but yet on the right track. good luck with the QWR and don't hesitate to also contact your state agencies - Division of Banks or similar in your state. They will usually contact the lender directly on your behalf and request a written response to your complaint.

Also, be sure to dig on the title insurance, oftentimes, a title company is merely a broker and they get the policy from another company. Hopefully yours was written by Stewart, Commonwealth, Chicago, FidelityNational or Old Republic - these are the big boys, so to speak, and have excellent reputations.

I wish you the best of luck and hope everything works out in your favor!

[ProfessorShays]

I do agree that raising the defense that the Plaintiff has not proved that they own the debt is a likely delay tactic, but if the reality of no-deficiency after foreclosure exists, why not do it? After all it might buy you a month or two (or more) time that you can remain in the home and not pay rent.

Daniel

[UniqueSituation]

Thanks everyone!

Well I followed up again with Placer Title Company and spoke with the Manager. It is official. They stated they have no copies of my paperwork. They said they had serveral people looking and it is the strangest thing because they have never lost this type of paperwork before. They suggested I get a hold of the Lender and go from there. They even volunteered to talk to the Lender directly if I needed them too.

Since my Lender is IndyMac (for my 1st and 2nd) I think they are having enough trouble these days figuring out who owns them. The last I heard the group of investors deal was delayed slightly, but eminent.

I will wait for my NOD before inquiring any further as that is the point in which this really matters.

[UniqueSituation]

Recap and Update:

Purchased Home in April of 2006 - $850K

First and second were purchase money only and they are with the same lender (servicer –IndyMac). 1^st was $637K and 2^nd was $127K

I am upside down on the loan. Zillow says the home is valued at $630K

Loan was an 80/20 HELOC with principal only for 2 yrs and then payments went way up (not disclosed to me – read more before concluding anything)

I live in California

The seller/real estate agent/mortgage broker – were all the same person (a “friend”)

The property was new, but I was the 2^nd owner as the 1^st was just “flipping”

The property was in the middle of a lawsuit (with a neighbor claiming flooding issues – I’m at the top of the hill, they are at the bottom). This fact was never disclosed when I purchased the property.

The Seller settled with the neighbor (after 1 year that I purchased the property) and would not disclose the terms of the settlement.

The seller/RE/Broker made me go through his appraiser (or I couldn’t buy the house – as my “friend” he said this was in my best interest).

My own appraiser had valued the house at $100K less at the time.

I have never received copies of the closing paperwork. I have consistently asked but never received them. My “friend” is no longer in the country and I have received calls from a private investigator trying to locate him.

Nothing was notarized at the closing. The closing was over dinner with other friends present.

I have called the Title Company numerous times to get copies of the paperwork. Finally in January of 2009 they admitted they don’t have a copy of my paperwork.

I made my last payment to IndyMac (1^st and 2^nd) in June of 2008.

I requested a Loan Mod for both my 1^st and 2nd on September 2008.

My 2^nd was approved in less than 5 days. I was told my 1^st would take 2 to 3 weeks. I have all this in writing from IndyMac.
One week later I received a letter from IndyMac summarizing what had transpired to date. They said my 2^nd was approved but still waiting on the 1^st. It says, and I quote: “…..your second is required to wait for the decision on your first to work out a loan modification for you so that IndyMac Federal Bank can send you both loan modifications together”.

One week later I received a very nasty letter from IndyMac 2^nd Mortg department saying I was refusing to communicate with them after all of their attempts to work something out. I called them to discuss this disturbing letter. They explained it was auto generated and I would continue to get them and the collection calls until I agreed to the modification on the 2^nd. I explained that I was told by them I had to wait for the 1^st’s decision. They said they knew nothing about that and I must agree to their terms immediately in order for them to stop sending letters and calls.

Fast forward to November of 2008. Still no calls from IndyMac re: the 1^st. I called numerous times and was told they were behind and not to worry.

On December 8^th I received a collection letter from IndyMac’s attorney. I responded with the “I dispute the validity of this notice”. Under California 580b they shouldn’t be able to do this.

On January 13^th they responded with “proof”-sent regular mail. They sent me a photo copy of my Deed of Trust (with just my signature, no one else). Also, the Deed of Trust says Home Savings (which is who the loan “started out” with but a few days before closing IndyMac had purchased it from them).

The Deed had a separate page attached (not part of the document) which was Notarized (not in my county and somewhere I have never been before). I NEVER had anything notarized during my loan process.

BTW, on December 18^th I had requested (in writing) that IndyMac provide me proof of them owning the note (the QWR). They replied back saying they would get the information to me by March 23^rd.

On January 13^th I received a certified letter by IndyMac’s attorney saying they field the NOD on January 6^th. That gives me until April 6^th, 2009, so close to when I am suppose to get out. Coincidence?

They attempted collections prior to the NOD. The 1st never have responded to the Loan Mod request (which they said in writing they would). They said I couldn’t agree to the 2^nd until I heard from the 1^st. They can’t provide me anything in writing about documents I signed. The Title Company doesn’t have my documents. What are my rights and what can I do?

[Enough Already]

Hi Unique,

I know what you're talking about when you refer to the lending having to prove they actually own the note. There is a FL attorney who first came up with this defense.

Here's a link to an article about it: Bloomberg.com: Exclusive
The first part is about Joe Lent, who hasn't paid his mortage in years, but if you skip down to the section: Lost-Note Affidavits, you'll find a good amount of info.

If you were to contact her office they may be able to referring you to an attorney familiar with this in your neck of the woods.

Good luck! Please post how it goes.

[UniqueSituation]

Enough Already,

THANKS! That's the key I was looking for. I have already called at least 20 attorney's in my area and not one knew anything about this. I will now take the angle of calling those who do know and see who they know in my area. I will definitely keep everyone in the loop. Thanks again!

[UniqueSituation]

Enough Already,

Quick update. Since I'm in California, when we go through foreclosure it's just a process, we are not taken to court, it is irrelevent who owns the Deed (which makes no sense to me).

I am getting that message from the countless attorney's I have spoken with in my area. Also, I called April's office (great suggeston by the way) but they said they knew of no one to refer me to in California (for the same reasons).

I haven't given up because there is much more to my situation than just who owns the note. There is no paper trail of my loan paperwork and nothing was ever noterized. I was never disclosed that I was paying principal only for 2 years and then the terms would change. Long story, but I bought this home from a "friend".

Also, there was a lawsuit (prior to me purchasing the property) on the property and it was settled after I owned it. I have asked for the details of the settlement, but the prior owner would not disclose them to me.

I could go on and on, but until I can find a good attorney to talk this whole thing over with, I think my options are limited.

BTW, I did call the attorney mentioned on this website and was told that because my case is already in foreclosure and because I have lost income over the last several months, there is no need for a forensic loan audit as I wasn't negotiating a loan mod, but more of a potential lawsuit on the seller/lender/etc...

So confusing.

[RedSoxFan]

Hi Unique,

I recently ran across a law firm who (supposedly) has successfully had 250 some odd mortgages deemed void through federal court over the past 5 years for varying violations of RESPA, TILA, etc.

I think the cost involved was laid out like this - free consult to determine if you have a case based on docs presented. if so, $1500 collected to complete audit of disclosures & closing docs. If your case is eligible for filing, another $1500 is charged to do so. if successful - and this is where it gets a little unusual - they mentioned a performance fee of anywhere from $50k to $100k that would appear in the form of a mortgage on your home payable to them, essentially replacing the loan they just successfully voided via legal system.

I suppose if someone was successful in getting a mortgage of significantly higher value "erased", ie. $200k or more and didn't have to make a mortgage payment for 12-18 months, it might be deemed a good deal. i assume everything is negotiable these days so it might be worth digging into.

have you or has anyone heard of other lawyers providing similar services? curious as to what else is out there............

[UniqueSituation]

RedSox Fan!

Thanks for the follow up! Unfortunately I think my questions and topics have worn out their welcome on this site. Your info sounds interesting! I hope someone can comment on it or check into it! It’s great when info gathered here can actually help people and touch their lives in a positive way!

Thanks again!

[Enough Already]

Unique,
It sounds like Red Sox Fan has an interesting angle there. You might try following up on that one. What a mortgage mess. Good luck to you. Please keep us posted.

[RedSoxFan]

hey Unique,
hope this finds you well & making progress. thought you might be interested to hear that according to NJ Court rule 4:64-2, production of the original note is not required to foreclosure. I know you're in another state but I would ask around to see if your state has made a similar ruling. even bad info can be extremely valuable.

also too, I know of borrowers in MA, PA & NJ who have successfully redeemed their property AFTER foreclosure and/or have had the term to redeem extended.

[maxx233]

I may very well go this route of defense, or at least keep it as an option, because 1) The lender's irresponsibility may actually get me a smidge of free rent 2) Most importantly - I want to know that after this is done, it's done! I don't want the *real* owner coming after me later.

I have no expectations or even lofty dreams that the mortgage would get erased, I just don't want to get f---ed later. I want records to show that I at least requested proof of ownership on the debt.

[RedSoxFan]

that's exactly why I posted the info - it is no longer an effective delay tactic. others have raised the issue and the courts have ruled accordingly. now the time it buys is measured in seconds instead of weeks or months as it may have previously.

title insurance covers you against any future claims, the policy you were forced to buy when you got the loan and/or the new owners policy more than protects you on that end.

if you have an interest in keeping the property you should consider a loan modification or forbearance agreement. Personally, I recommend using a 3rd party, one that only receives compensation if they are successful, because lenders look for reasons to decline you (even if you qualify) and the reputable 3rd party is fully vested in your success, unlike your lender.