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How To Use "Show Me The Note" In Foreclosure Defense

Updated on June 27, 2013

When a homeowner purchases a property, there will be many documents involved with the transaction. The two most important documents are the NOTE and MORTGAGE (DEED OF TRUST in certain states). The mortgage or deed of trust is used as collateral to the the note to make the loan secured, and is also recorded against the property in the Recorder's Office where the property is located. The note is a promise to pay (like an IOU) which specifically states that the homeowner will pay repay "X" amount of dollars at a certain interest rate (including any changes in an adjustable rate mortgage) over "X" amount of years. Typically most mortgages were for 30 years, although due to the recent securitization of mortgages there were many "exotic" mortgages offered to homeowners as an alternative, often with "teaser" interest rates that would reset after a certain period of time, leaving many homeowners unable to pay the new amount. Some examples of these included a 2/28 ARM, 5/25 ARM, interest only mortgages, etc.

Most if not all mortgages originated over the past 10-20 years were securitized and have been sliced and diced amongst global investors, with no one entity having clear ownership rights as a result. This has backfired on the banks with some homeowners being successful in delaying and in some cases stopping foreclosure altogether, by simply requesting that the bank that is foreclosing "produce the note". This has been a difficult request for the banks to complete, because the original notes and mortgages were DESTROYED after the loans were securitized, with certificates and bonds issued to the investors as evidence of ownership rights of the mortgages.

When a homeowner demands that the foreclosing bank "produce the note", the homeowner is actually challenging the legal right bank to foreclose on the property, and also to determine if the bank actually has "standing" to even sue the homeowners in the first place. If the foreclosing bank cannot provide the ORIGINAL note and mortgage as proof of ownership and standing to foreclose, then the bank does not have the legal authority to foreclose against the homeowners, and the case should be thrown out in favor of the homeowners.

When the homeowner requests this information, the bank is REQUIRED to produce the ORIGINAL mortgage and note when it is requested (with ALL transfers of the note being stamped on the note as endorsements, or using an allonge as an alternative), and not COPIES of the note and/or mortgage (which anyone can easily obtain from the recorder's office).

These endorsements and/or allonges which document the transfer of the note should also match all of the assignments of mortgage recorded against the property. If there are any discrepancies between the two, there is a "gap" in the chain of title, and an action to Quiet Title may need to be commenced.

The foreclosing bank may also try to get away with filing a LOST NOTE AFFIDAVIT which is a document certifying to the court that they "lost" the original note. Yeah right, like a bank is REALLY going to "lose" a note worth hundreds of thousands of dollars!!

In states that use a non judicial foreclosure, the homeowner will need to file a lawsuit in order to use these strategies and to halt the foreclosure process, as non judicial foreclosure is conducted outside of the court, and strict procedures must be followed by the bank, otherwise the foreclosure will be VOID. In states that use judicial foreclosure, the foreclosing bank will file a lawsuit against the homeowner, which should be considered as an invitation into court to defend your rights. It is also CRITICAL that the homeowner file their own answer to the banks complaint, and assert any counterclaims, etc. as a defense to the foreclosure, including demanding that the bank "produce the note". IF THESE ISSUES ARE NOT RAISED AS A DEFENSE, THEY WILL BE CONSIDERED "WAIVED" BY THE COURT AND NOT TO BE RAISED AT A LATER TIME!!

Although many homeowners have been successful using this strategy without the assistance of an Attorney, other homeowners have ran into "roadblocks" in fighting the banks due to not following court procedures or other procedural errors. For this reason, it is HIGHLY recommended that the homeowners AT MINIMUM consult with an Attorney competent in the local property laws and jurisdication where the property is located to weigh all options and to make an informed decision before proceeding.

It is ESSENTIAL that the issues of legal standing along with who actually owns the mortgage be determined in court. When a court allows the foreclosure to proceed without demanding that the foreclosing bank prove their legal right to foreclose, the homeowner could actually be sued FOR A SECOND TIME for the same debt when the CORRECT party produces the required documents and demands payment or forecloses on the property.



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