Foreclosure: Demanding the note

[Bootis]

Just saw a video on Yahoo front page, abouta tactic for homeowners to stall foreclosures by demanding the bank produce the original note of the loan. Since the loan is often passed on over and over and bundled or whatnot, with a certain bit of ridiculous incompetence added in each time apparently, people can buy a lot of time they need to get things together financially. A statement in the video drew my attention though- they mentioned it’s good for a stall tactic, but eventually the bank will usually find the original note so it probably will not work forever.

but there were a lot of "usually"s and “probably”'s.

What if they can’t find it?Are people really getting free houses?

[Richard_Parker]

If they can’t find the note, they can’t foreclose.

The first big success of the produce-the-note movement came in 2007 when a federal judge in Cleveland threw out 14 foreclosures by Deutsche Bank National Trust Co. because the bank failed to produce the original notes.

Link

[ASAKMOTSD]

Interesting little loop hole - So is the note invalid then?

[Richard_Parker]

@ASAKMOTSD

Interesting little loop hole - So is the note invalid then?

What do you mean by invalid? Whoever has the note can still exercise foreclosure rights.

[Really_Not_All_That_Bright]

@Richard_Parker

What do you mean by invalid? Whoever has the note can still exercise foreclosure rights.

I think he’s asking if that means you can just quit repaying the loan until they find the original note. Which is a good question, really.

[Jormungandr]

I can’t find the article, but I remember a man in Michigan stopped foreclosure on his home by a European company that “owned” part of his mortgage as an investment. Due to all the transactions and somebody selling something to someone and to someone else, the claim was on computer screen only. The man demanded they prove their claim with the note and they couldn’t

[Gfactor]

This is a complicated issue:

1.This is the case that is often cited: http://74.125.95.132/search?q=cache:l9yBTH2YGw4J:commercialforeclosureblog.typepad.com/indiana_commercial_forecl/files/BoykoOpinion.pdf+boyko+foreclosure+cases&hl=en&ct=clnk&cd=2&gl=us&client=firefox-a It’s pretty heavily grounded in Federal Civil Procedure–and Ohio real estate law. It’s a foreclosure action based on federal court diversity jurisdiction. I haven’t looked at the rules in question (real party in interest) mostly, but the Court’s reasoning seems weak.

2. Ohio is a judicial foreclosure state as is Florida, where the Lovelace case was decided http://www.google.com/hostednews/ap/article/ALeqM5hLOuvy9fguykC2NydTDrkqqyybvQD96DHN5G0 . If it was Michigan, or a lot of other states, the holder of the mortgage could (and would) foreclose by advertisement. In that case, the homeowner would have to file a lawsuit challenging the validity of the foreclosure.

3. There are laws and rules of evidence that permit proof of lost instruments. Ohio has one:

1303.38 Enforcement of lost, destroyed or stolen instrument - UCC 3-309.

(A) A person not in possession of an instrument is entitled to enforce the instrument if all of the following apply:

(1) The person was in possession of the instrument and entitled to enforce it when loss of possession occurred.

(2) The loss of possession was not the result of a transfer by the person or a lawful seizure.

(3) The person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.

(B) A person seeking enforcement of an instrument under division (A) of this section must prove the terms of the instrument and the person’s right to enforce the instrument. If that proof is made, divisions (A) and (B) of section 1303.36 of the Revised Code applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection for the person required to pay the instrument may be provided by any reasonable means.

Section 1303.36 - Ohio Revised Code | Ohio Laws (of course it’s possible, the foreclosing party never took possession of the Note, and you could have all sorts of fun arguing about that.)

Florida too: Statutes & Constitution :View Statutes :->2008->Ch0673->Section 3091 : Online Sunshine

All of the notes that are securitizes are standard forms, and there’s a record of which form was used. There are also copies of the note available. So in part, it’s due to sloppy lawyering.

4. The ruling in this case is based mostly on the failure to record transfers, although it does mention the Note. That’s a different problem. It can also be fixed.

@Really Not All That Bright

I think he’s asking if that means you can just quit repaying the loan until they find the original note. Which is a good question, really.

Well, depending on the jurisdiction, you might able to be able to stall foreclosure, which is the heart and soul of foreclosure defense. But the creditor will accelerate the debt, so depending on the jurisdiction and the kind of mortgage you have, you might or might not be able to reinstate the mortgage and resume payments. https://www.efanniemae.com/sf/formsdocs/documents/secinstruments/doc/3036mf.doc (opens a Word document). And they’ll probably find the note http://www.google.com/hostednews/ap/article/ALeqM5hLOuvy9fguykC2NydTDrkqqyybvQD96DHN5G0 If you can’t reinstate the loan, you’re in foreclosure. And of course, the default will damage your credit.

[Snnipe_70E]

@Bootis

Just saw a video on Yahoo front page, abouta tactic for homeowners to stall foreclosures by demanding the bank produce the original note of the loan. Since the loan is often passed on over and over and bundled or whatnot, with a certain bit of ridiculous incompetence added in each time apparently, people can buy a lot of time they need to get things together financially. A statement in the video drew my attention though- they mentioned it’s good for a stall tactic, but eventually the bank will usually find the original note so it probably will not work forever.

but there were a lot of "usually"s and “probably”'s.

What if they can’t find it?Are people really getting free houses?

I do not think this would work.
My note has been passed around several times. It is an adjustable. The new holder sent me notice about changes according to the note. Problem wasa the changes were not according to the note. I called and objected. She said that she would have to check to be sure about what I said. Ended up making the changes according to the note. If they could not find the note and made improper changes I would have been required to come up with my copy.

I think the bank could foreclose and require you to come up with your copy of the note to stop it.