# New Rule Says Banks Must Prove Ownership Before Foreclosing **URL:** \ **Category:** Factual Questions\ **Created:** [May 23, 2010, 4:22pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469 "2010-05-23T16:22:34Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![joebuck20](https://avatars.discourse-cdn.com/v4/letter/j/74df32/32.png) [@joebuck20](https://boards.straightdope.com/u/joebuck20)\ **Post date:** [May 24, 2010, 3:33am UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/21 "2010-05-24T03:33:21Z")
> [@spoke-](#): > > My sympathy is not with the banks. It is with the homeowners who have scrimped and struggled to make their payments on time. It has to be disheartening for such a homeowner to see a neighbor who hasn’t been so diligent getting a free house. Well, I’m sure it was disheartening for a lot of people to see O.J. Simpson walk away free and clear from his murder charge. But that’s just the system we have in this country - one that takes seriously and has a great deal of respect for the rights of the accused. It’s not perfect by any means, and you could argue that it’s not fair, but it’s preferable to a system where the accused can be taken down with little to no evidence. ---
**Author:** ![Diogenes\_the\_Cynic](https://avatars.discourse-cdn.com/v4/letter/d/e99b99/32.png) [@Diogenes\_the\_Cynic](https://boards.straightdope.com/u/Diogenes_the_Cynic)\ **Post date:** [May 24, 2010, 3:46am UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/22 "2010-05-24T03:46:48Z")
> [@spoke-](#): > > “Not going to prison” isn’t exactly a reward. Nobody would commit a crime for that “incentive.” > > A free house, on the other hand, pretty clearly qualifies as an affirmative reward. > > Don’t get me wrong. I’m all for thwarting the banks if they screw up the paperwork. But this seems to really mess with incentives. How is someone who is scrimping and saving and sacrificing to pay their mortgage regularly going to feel when they see a shiftless neighbor skip payments for six months and then get a free house for it? I pay my mortgage regularly and I don’t give a fuck. I don’t need your sympathy, but thanks anyway. Would you rather have the banks be able to snatch houses without having to prove they own them? ---
**Author:** ![Diogenes\_the\_Cynic](https://avatars.discourse-cdn.com/v4/letter/d/e99b99/32.png) [@Diogenes\_the\_Cynic](https://boards.straightdope.com/u/Diogenes_the_Cynic)\ **Post date:** [May 24, 2010, 3:48am UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/23 "2010-05-24T03:48:13Z")
> [@spoke-](#): > > My sympathy is not with the banks. It is with the homeowners who have scrimped and struggled to make their payments on time. It has to be disheartening for such a homeowner to see a neighbor who hasn’t been so diligent getting a free house. It’s not disheartening for me at all. It makes my heart glad. ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [May 24, 2010, 3:49am UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/24 "2010-05-24T03:49:23Z")
It does seem reasonable that anyone, including a bank, should have to provide some evidence that it holds a note on a property before foreclosing. Somebody has to have the burden of proof in any dispute. And how is a property owner going to prove the bank doesn’t hold the note? I agree there are going to be cases where people will not be paying their mortgages and banks will not be able to prove they owned the note. In such cases, the party that’s “right” will lose the case. But even in these cases, there is some degree of culpability on the bank - their loss arose because they failed to keep proper records. And some people who’ve been faithful payers are going to see other people get away with not paying. That’s going to be an undeserved windfall for those non-payers. But like any windfall, it’s just blind luck. Some people get rewards they don’t deserve and some people get problems they don’t deserve. ---
**Author:** ![Guinastasia](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/guinastasia/32/5751_2.png) [@Guinastasia](https://boards.straightdope.com/u/Guinastasia)\ **Post date:** [May 24, 2010, 3:53am UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/25 "2010-05-24T03:53:53Z")
> [@jtgain](#): > > How are the scenario’s different: > > 1. I claim that I hold a $100k lien on my neighbor’s house. I cannot locate the note. > > 2. The bank claims that they hold a $100k lien on my neighbor’s house. They cannot locate the note. > > You said that in scenario #1, that I am “SOL”, but for me to apply that you scenario #2, I am twisting your words? If either one is that incompetant, well yeah, they SHOULD be SOL. ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [May 24, 2010, 4:26am UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/26 "2010-05-24T04:26:44Z")
> [@Diogenes\_the\_Cynic](#): > > It’s not disheartening for me at all. It makes my heart glad. For my part (since I trust you don’t presume to speak for everyone), I am reminded of the story of the ant and the grasshopper…[the _Muppets_ version](http://www.youtube.com/watch?v=_oALidRu2ak). ---
**Author:** ![Diogenes\_the\_Cynic](https://avatars.discourse-cdn.com/v4/letter/d/e99b99/32.png) [@Diogenes\_the\_Cynic](https://boards.straightdope.com/u/Diogenes_the_Cynic)\ **Post date:** [May 24, 2010, 4:28am UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/27 "2010-05-24T04:28:23Z")
They’re not taking anything from me. How is that story applicable. I’m just glad to know that a bank is going to have to work at it to take my house. ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [May 24, 2010, 4:44am UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/28 "2010-05-24T04:44:09Z")
I disagree. It’s nothing to celebrate when somebody gets out of repaying a debt. If somebody loaned you money in good faith then you should be trying to pay it back. And if you loaned somebody money in good faith then they should be trying to pay you back. ---
**Author:** ![Diogenes\_the\_Cynic](https://avatars.discourse-cdn.com/v4/letter/d/e99b99/32.png) [@Diogenes\_the\_Cynic](https://boards.straightdope.com/u/Diogenes_the_Cynic)\ **Post date:** [May 24, 2010, 4:45am UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/29 "2010-05-24T04:45:53Z")
It’s something to celebrate when a bank is not allowed to take someone’s home without proving they have a right to. I want them to have to prove they are owed a debt at all. ---
**Author:** ![MOIDALIZE](https://avatars.discourse-cdn.com/v4/letter/m/e274bd/32.png) [@MOIDALIZE](https://boards.straightdope.com/u/MOIDALIZE)\ **Post date:** [May 24, 2010, 4:52am UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/30 "2010-05-24T04:52:39Z")
> [@Little\_Nemo](#): > > I disagree. It’s nothing to celebrate when somebody gets out of repaying a debt. If somebody loaned you money in good faith then you should be trying to pay it back. And if you loaned somebody money in good faith then they should be trying to pay you back. The social norms surrounding the repayment of debt don’t apply to banks that are in the business of making loans solely to slice them up and sell them for profit. The days of a genuine long-term business relationship between a borrower and a mortgage lender are long gone. ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [May 24, 2010, 5:07am UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/31 "2010-05-24T05:07:09Z")
I just know too many homeowners who were irresponsible. They stretched to the limit to buy their homes with stupid ARM loans, and then they went out and leased expensive cars and lived lives on credit that were well beyond their means and left themselves no margin for error. As someone who lives simply and drives an inexpensive car, the better to make my own house payments and have some financial security, I would find it a bit frustrating to see someone who has behaved irresponsibly rewarded with a free house, while I am stuck here still paying my mortgage. (Where’s _my_ windfall?) ---
**Author:** ![MOIDALIZE](https://avatars.discourse-cdn.com/v4/letter/m/e274bd/32.png) [@MOIDALIZE](https://boards.straightdope.com/u/MOIDALIZE)\ **Post date:** [May 24, 2010, 5:12am UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/32 "2010-05-24T05:12:00Z")
Stop paying your mortgage and hope that you don’t get foreclosed on. There’s your “windfall.” ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [May 24, 2010, 5:16am UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/33 "2010-05-24T05:16:11Z")
Hardly an answer. _My_ bank may have kept its papers in order. ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [May 24, 2010, 1:23pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/34 "2010-05-24T13:23:48Z")
But is that what happens under this rule? If the bank says “Sorry, your honor, we cannot locate the original note” then is that the end of their case? Does the homeowner walk away with a house that is free and clear? ---
**Author:** ![Lemur866](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lemur866/32/434_2.png) [@Lemur866](https://boards.straightdope.com/u/Lemur866)\ **Post date:** [May 24, 2010, 2:43pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/35 "2010-05-24T14:43:25Z")
No, it means the bank can’t forclose on the property until they dig up the proof that they hold a lien on the house. Since the homeowner is facing foreclosure, that means they probably aren’t paying their mortgage, which means that until the bank comes up with some sort of evidence they can stay in the house rent free for a while. In the unlikely event that the bank never gets around to finding the documentation, that means the homeowner can stay there for a long time. Except a bank facing a multi-thousand dollar loss is probably going to put some effort into coming up with the documentation. And if they never do, the homeowner doesn’t own the house free and clear, rather they can’t be evicted from a house that has uncertain ownership. If the homeowner tried to sell the house they’d find it was impossible, because they don’t actually own the house. Eventually the homeowners are probably going to fall behind on their property taxes and the state will seize the house. Basically the house is in limbo until someone either finds the documentation or the homeowners screw up and get evicted (or leave) for other reasons. If you think that’s unfair to the bank, consider the alternative–the bank gets to evict the homeowner with no proof that they even own the fucking house. That’s pretty unfair. And if a bank can’t keep track of it’s records, then fuck them. That’s their fucking job. ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [May 24, 2010, 2:49pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/36 "2010-05-24T14:49:28Z")
> [@Lemur866](#): > > No, it means the bank can’t forclose on the property until they dig up the proof that they hold a lien on the house. Since the homeowner is facing foreclosure, that means they probably aren’t paying their mortgage, which means that until the bank comes up with some sort of evidence they can stay in the house rent free for a while. In the unlikely event that the bank never gets around to finding the documentation, that means the homeowner can stay there for a long time. > > Except a bank facing a multi-thousand dollar loss is probably going to put some effort into coming up with the documentation. And if they never do, the homeowner doesn’t own the house free and clear, rather they can’t be evicted from a house that has uncertain ownership. If the homeowner tried to sell the house they’d find it was impossible, because they don’t actually own the house. Eventually the homeowners are probably going to fall behind on their property taxes and the state will seize the house. > > Basically the house is in limbo until someone either finds the documentation or the homeowners screw up and get evicted (or leave) for other reasons. > > If you think that’s unfair to the bank, consider the alternative–the bank gets to evict the homeowner with no proof that they even own the fucking house. That’s pretty unfair. And if a bank can’t keep track of it’s records, then fuck them. That’s their fucking job. Thanks for the explanation, but I would think (and IANAL) that the court would have to do something at some point. How is the bank scenario different than me claiming a lien on the neighbor’s house but I “lost” the paperwork? Would my neighbor be in the same legal limbo if he tried to sell his house? In other words, after a certain period of time, the court won’t dismiss the case against the bank and say “Forget it. You have no evidence of a claim here. Dismissed with prejudice.” ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [May 24, 2010, 2:51pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/37 "2010-05-24T14:51:07Z")
> [@jtgain](#): > > But is that what happens under this rule? If the bank says “Sorry, your honor, we cannot locate the original note” then is that the end of their case? Does the homeowner walk away with a house that is free and clear? Hard to say unless we see the text of the actual rule announced by the Florida Supreme Court (as referenced in the article). I am assuming that the homeowner is left in a sort of limbo. There is a recorded mortgage, but no lander can prove that it is the one with the right to foreclose on that mortgage. So the homeowner gets to stay in the property without making payments. The recorded mortgage prevents the property from being held “free and clear,” but if nobody is able to foreclose on it, eventually the applicable statute of limitations (and I don’t know what that is in Florida) would effectively remove the lien. ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [May 24, 2010, 2:56pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/38 "2010-05-24T14:56:20Z")
> [@jtgain](#): > > How is the bank scenario different than me claiming a lien on the neighbor’s house but I “lost” the paperwork? Would my neighbor be in the same legal limbo if he tried to sell his house? The difference is there is a mortgage recorded at the courthouse. The problem is the party seeking to foreclose, and who claims to be the current owner of that mortgage, can’t find the paperwork to prove it. When mortgages have been sliced and diced for the sake of being “securitized” that is a real problem. It’s not a verbal claim that clouds the neighbor’s title, but rather the mortgage recorded in the real estate records at the courthouse. ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [May 24, 2010, 3:00pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/39 "2010-05-24T15:00:49Z")
> [@spoke-](#): > > The difference is there is a mortgage recorded at the courthouse. The problem is the party seeking to foreclose, and who claims to be the current owner of that mortgage, can’t find the paperwork to prove it. When mortgages have been sliced and diced for the sake of being “securitized” that is a real problem. > > It’s not a verbal claim that clouds the neighbor’s title, but rather the mortgage recorded in the real estate records at the courthouse. I see. Thanks. But doesn’t that mortgage recorded at the courthouse say Bank ABC, Inc? And wouldn’t it be a simple matter to prove that Bank XYZ purchased the assets of Bank ABC on such and such date? ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [May 24, 2010, 3:09pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/40 "2010-05-24T15:09:48Z")
I didn’t explain that very well. When your neighbor bought his home, he also signed a mortgage. That mortgage was recorded at the courthouse, and anyone can go down there and see it. The original holder of that mortgage has sometimes sold the mortgage to someone else. Often it has changed hands multiple times. So now your neighbor isn’t paying and the current owner of the mortgage wants to foreclose. That mortgage holder has to go back and dig up all the original paperwork that proves its right to foreclose. This means not only the original mortgage, but also all the transfer documents. Understand that mortgages are often sold in bulk so, the document showing transfer may not be in the actual loan file. Then too, there may be defunct institutions (banks and mortgage companies) back up the chain of title. It could be an impossibly labyrinthine process to locate and produce all the applicable paperwork. Now take the recent phenomenon of “securitization” of real estate mortgages, where ownership of a single mortgage may be divided and resold multiple times, and the documentation becomes exponentially more labyrinthine. [Previous page](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469.md?page=1) [Next page](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469.md?page=3)