Home Loans and Support

Does your Lender Have the Right to foreclose?

Discussion in 'Deed in Lieu of Foreclosure - Do You Need Help to ' started by UniqueSituation, Nov 24, 2008.

  1. UniqueSituation

    UniqueSituation LoanSafe Member

    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! :confused:

  2. Maurice Bedard

    Maurice Bedard Call 1-800-779-4547 Staff Member Loan Safe Mortgage

    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........
  3. UniqueSituation

    UniqueSituation LoanSafe Member

    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.

  4. UniqueSituation

    UniqueSituation LoanSafe Member


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

  5. Maurice Bedard

    Maurice Bedard Call 1-800-779-4547 Staff Member Loan Safe Mortgage

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

    UniqueSituation LoanSafe Member

    Indymac Bank

  7. Maurice Bedard

    Maurice Bedard Call 1-800-779-4547 Staff Member Loan Safe Mortgage

    IndyMac Federal
    Loss Mitigation
  8. UniqueSituation

    UniqueSituation LoanSafe Member

    Thanks again.

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

  9. Maurice Bedard

    Maurice Bedard Call 1-800-779-4547 Staff Member Loan Safe Mortgage

  10. UniqueSituation

    UniqueSituation LoanSafe Member

    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.

  11. cactus77727

    cactus77727 LoanSafe Member

    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...
  12. RedSoxFan

    RedSoxFan LoanSafe Member

    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 ;)
  13. 925girl

    925girl LoanSafe Member

    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.
  14. ProfessorShays

    ProfessorShays LoanSafe Member

    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.


    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.
  15. RedSoxFan

    RedSoxFan LoanSafe Member

    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. <o>:p></o>:p>
    <o>:p> </o>:p>
    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 <o>:p></o>:p>
    <o>:p> </o>:p>
    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 theirsâ€Â, 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. <o> is it reasonable to conclude otherwise?
  16. Ambling

    Ambling LoanSafe Member

    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.
  17. RedSoxFan

    RedSoxFan LoanSafe Member

    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).
  18. UniqueSituation

    UniqueSituation LoanSafe Member

    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.
  19. RedSoxFan

    RedSoxFan LoanSafe Member

    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.
  20. UniqueSituation

    UniqueSituation LoanSafe Member

    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.

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