# 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:** 15\ **Page:** 5
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [May 25, 2010, 5:07pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/81 "2010-05-25T17:07:33Z")
> [@MOIDALIZE](#): > > It’s not fraud or wrongful foreclosure. What are you talking about? I think you got your links mixed up. Your second link is the same as the first. ---
**Author:** ![TruCelt](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/trucelt/32/523_2.png) [@TruCelt](https://boards.straightdope.com/u/TruCelt)\ **Post date:** [May 25, 2010, 5:28pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/82 "2010-05-25T17:28:58Z")
There’s been a big problem in my area with banks foreclosing but refusing to take responsibility for the property. This is especially problematic when there is a renter involved. The banks foreclose, and continue to accept the rent, but then when repairs need to be made they claim they are not the real owners, who due to securitization are legion, and no one entity can be held responsible for the necessary repairs. In other cases the houses stand empty because no one will take responsibility for managing a rental property, or selling it at a huge loss. This has a huge impact upon the entire neighborhood, often with gangs moving in, fires, etc. With the utilities turned off the property will eventually deteriorate, and the end holders of the securitized assets lose far more than they would have if the original homeowners had just been allowed to re-negotiate their monthly payments (or even live there free of charge). So, I’m wondering if this legislation would then allow the courts to return to the foreclosure documents and say “See, right here, you _proved_ you owned it, so _you_ are responsible.” ---
**Author:** ![MOIDALIZE](https://avatars.discourse-cdn.com/v4/letter/m/e274bd/32.png) [@MOIDALIZE](https://boards.straightdope.com/u/MOIDALIZE)\ **Post date:** [May 25, 2010, 5:31pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/83 "2010-05-25T17:31:05Z")
> [@spoke-](#): > > That’s not going to be citable, because it doesn’t make the news. As described before, the house just goes into limbo, and if the bank doesn’t come up with the paperwork, the statute of limitations on the mortgage runs out. That can be many years later, and it isn’t going to make the papers when it silently happens. Well…the loan may become uncollectable if the bank sits long enough, but the lien on the property can last for much longer, even though the debt is uncollectable. ---
**Author:** ![MOIDALIZE](https://avatars.discourse-cdn.com/v4/letter/m/e274bd/32.png) [@MOIDALIZE](https://boards.straightdope.com/u/MOIDALIZE)\ **Post date:** [May 25, 2010, 5:32pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/84 "2010-05-25T17:32:56Z")
> [@spoke-](#): > > I think you got your links mixed up. Your second link is the same as the first. :smack: Crap! You’re right. Here’s the real story: [http://www.bloomberg.com/apps/news?pid=20601109&sid=aejJZdqodTCM&refer=home](http://www.bloomberg.com/apps/news?pid=20601109&sid=aejJZdqodTCM&refer=home) ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [May 25, 2010, 5:56pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/85 "2010-05-25T17:56:45Z")
> [@MOIDALIZE](#): > > Well…the loan may become uncollectable if the bank sits long enough, but the lien on the property can last for much longer, even though the debt is uncollectable. The lien secures a promissory note. When the statute of limitations on the note runs out, the homeowner could file a quiet title action to clear the lien. Pretty simple. The statute of limitations on the note will vary from state to state. [This site](http://www.fair-debt-collection.com/SOL-by-State.html#10) says it is 5 years in Florida. (That would be 5 years from the date of default.) I don’t know if that’s accurate, so I don’t vouch for it. ETA: Statues of limitations can vary widely by state. In Georgia, for example, loan documents are usually executed “under seal” making the statute of limitations 20 years here. ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [May 25, 2010, 6:05pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/86 "2010-05-25T18:05:07Z")
Just confirming. Here’s the Florida [statute of limitations](http://www.flsenate.gov/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0095/SEC11.HTM&Title=-%3E2006-%3ECh0095-%3ESection%2011). It **is** 5 years on an action to foreclose a mortgage. ---
**Author:** ![LurkerInNJ](https://avatars.discourse-cdn.com/v4/letter/l/ed655f/32.png) [@LurkerInNJ](https://boards.straightdope.com/u/LurkerInNJ)\ **Post date:** [May 25, 2010, 6:18pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/87 "2010-05-25T18:18:13Z")
There are a lot of misconceptions in this thread, one being that notes and mortgages are the same thing. They aren’t. The mortgage is what turns the note into a secured debt. The note is promissory, the mortgage is secured by real property. There is no “statute of limitations” on a mortgage. The fact that a lender can’t collect from you on a note has no effect on the lien on the property the mortgage secured. For clear title, a mortgage has to be discharged one way or another. This can be a simple process or a complex legal process. Mortgages are recorded, notes are not. Florida is now requiring that a lender have the original note or a very very very good reason why they do not, rather than rubber stamping foreclosure filing with a “sorry, we lost it”. It’s going to slow foreclosures down, but it’s not going to be a free house giveaway. Florida is also a judicial foreclosure state. Not all states are. ---
**Author:** ![MOIDALIZE](https://avatars.discourse-cdn.com/v4/letter/m/e274bd/32.png) [@MOIDALIZE](https://boards.straightdope.com/u/MOIDALIZE)\ **Post date:** [May 25, 2010, 6:19pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/88 "2010-05-25T18:19:03Z")
> [@spoke-](#): > > The lien secures a promissory note. When the statute of limitations on the note runs out, the homeowner could file a quiet title action to clear the lien. Pretty simple. Not if the SOL for liens is longer than the SOL for debts. The lien can survive the debt, which can cloud the title. Depends on what state you’re in. ---
**Author:** ![LurkerInNJ](https://avatars.discourse-cdn.com/v4/letter/l/ed655f/32.png) [@LurkerInNJ](https://boards.straightdope.com/u/LurkerInNJ)\ **Post date:** [May 25, 2010, 6:37pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/89 "2010-05-25T18:37:28Z")
> [@spoke-](#): > > Just confirming. Here’s the Florida [statute of limitations](http://www.flsenate.gov/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0095/SEC11.HTM&Title=-%3E2006-%3ECh0095-%3ESection%2011). It **is** 5 years on an action to foreclose a mortgage. That’s not what that means. Lets say you got a mortgage from Bank A in 1968. You paid it off, and at your mortgage burning party in 1988, you accidentally burned the mortgage discharge (showing that your loan had been paid off) that was supposed to have been filed with the county. Bank A was eventuially taken over by Bank B. Bank B can’t show up in 2010, 22 years after your mortgage matured and file for foreclosure because you torched the discharge. They had 5 years (in Florida) from the date of maturity of the original loan or any extension to file for foreclosure. The mortgage lien would still be showing up on title if it had not been discharged on record. You would have to clear this before selling the property. ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [May 25, 2010, 6:38pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/90 "2010-05-25T18:38:52Z")
> [@LurkerInNJ](#): > > There are a lot of misconceptions in this thread, one being that notes and mortgages are the same thing. They aren’t. The mortgage is what turns the note into a secured debt. The note is promissory, the mortgage is secured by real property. Who said they were the same thing? The mortgage secures the note. The note is the promise to pay. If the statute of limitations has run on the note, the mortgage has no value. It is still a cloud on title, but (depending on the state, I suppose) that could be remedied with a quiet title action. > [@](#): > > There is no “statute of limitations” on a mortgage. Maybe not where you’re from, but in Florida, there is a statute of limitations for _enforcing_ a mortgage. [I linked it above](http://www.flsenate.gov/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0095/SEC11.HTM&Title=-%3E2006-%3ECh0095-%3ESection%2011). > [@](#): > > (2) WITHIN FIVE YEARS.– > > …(c) An action to foreclose a mortgage. Even in states that don’t specifically have a statute of limitations on foreclosure, a mortgage is only as valuable as the debt it secures. If the statute of limitations has run on the debt (the underlying promissory note), I see no reason why a homeowner couldn’t seek to clear the mortgage via an action to quiet title. ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [May 25, 2010, 6:41pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/91 "2010-05-25T18:41:18Z")
> [@LurkerInNJ](#): > > That’s not what that means. You have case law? Statues of limitations on indebtedness in these parts run from the date of default. ---
**Author:** ![MOIDALIZE](https://avatars.discourse-cdn.com/v4/letter/m/e274bd/32.png) [@MOIDALIZE](https://boards.straightdope.com/u/MOIDALIZE)\ **Post date:** [May 25, 2010, 6:42pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/92 "2010-05-25T18:42:18Z")
> [@spoke-](#): > > Even in states that don’t specifically have a statute of limitations on foreclosure, a mortgage is only as valuable as the debt it secures. If the statute of limitations has run on the debt (the underlying promissory note), I see no reason why a homeowner couldn’t seek to clear the mortgage via an action to quiet title. They can’t until the limitation period on the lien is up. [In Florida](http://www.flsenate.gov/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0095/SEC281.HTM&Title=-%3E2009-%3ECh0095-%3ESection%20281#0095.281), that’s 5 years after the date when the debt obligation was originally supposed to mature, or 20 years if no date is given. ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [May 25, 2010, 7:01pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/93 "2010-05-25T19:01:11Z")
> [@MOIDALIZE](#): > > They can’t until the limitation period on the lien is up. [In Florida](http://www.flsenate.gov/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0095/SEC281.HTM&Title=-%3E2009-%3ECh0095-%3ESection%20281#0095.281), that’s 5 years after the date when the debt obligation was originally supposed to mature, or 20 years if no date is given. Trying to sort this out. [(PDF) This sheds some light on the way things work in Florida.](http://www.miamidade.gov/csd/library/Foreclosure_Defenses_Types.pdf) > [@](#): > > The basic principles were set forth in one case: “Section 95.11(2)(c), Florida Statutes (1979), provides that an action to foreclose a mortgage shall be commenced within five years. Section 95.03(1) provides that generally a cause of action accrues when the last element constituting the cause of action ‘on a negotiable or non-negotiable note payable on demand … is a first written demand for payment.’” Smith v. Branch, 391 So.2d 797, 798 (Fla. 2d DCA 1980), citing Ruhl v. Perry, 390 So.2d 353 (Fla. 1980); see also Jones v. Rainey, 386 So.2d 1319 (Fla. 2d DCA 1980). > > For a mortgage without an acceleration clause, an action is timely where the mortgagee files more than five years after default, but less than five years after final maturity. Locke v. State Farm Fire & Cas. Co., 509 So.2d 1375 (Fla. 1st DCA 1987); Conner v. Coggins, 349 So.2d 780 (Fla. 1st DCA 1977); see also Smith v. Federal Deposit Ins. Corp., 61 F.3d 1552, 1561 (11th Cir. 1995) (when promissory note secured by mortgage contains optional acceleration clause, foreclosure action accrues, and statute of limitations begins to run on the earlier of the date when acceleration clause is invoked or stated date of maturity). If the maturity of a mortgage is not ascertainable from the record, the mortgage lien > terminates 20 years after the date of the mortgage. > > Even before the statute of limitations has expired on a foreclosure claim, the lender can, in exceptionalcircumstances, forfeit the right to foreclose by virtue of delay and resulting prejudice to the borrower that constitutes laches. Laches can arise in the foreclosure context when the mortgagee inexcusably delays in bringing its action, resulting in circumstances making it inequitable to permit the plaintiff to enforce its claim against the defendant. So the five years runs **not** from the date of default, but from the date the lender chooses to accelerate the indebtedness, or from the date of maturity, whichever is earlier. Interesting. But that all just means the homeowner is going to have to wait longer to clear the title if the mortgage holder can’t get its documents together. (And it does give the mortgage holder a lot of time to do so.) ---
**Author:** ![The\_Evil\_Prince\_Zorte](https://avatars.discourse-cdn.com/v4/letter/t/e95f7d/32.png) [@The\_Evil\_Prince\_Zorte](https://boards.straightdope.com/u/The_Evil_Prince_Zorte)\ **Post date:** [May 25, 2010, 7:03pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/94 "2010-05-25T19:03:49Z")
An annoying misconception that I was surprised to see in the article is, that the bank owns the house- > [@](#): > > A new Florida Supreme Court rule requires lenders to verify they are the actual owners of a home before making the initial case for foreclosure. The bank owns the note, not the house. Foreclosure is what the bank is doing to gain ownership of the house. Homeowners might not get a property free and clear from the bank not finding the note, and it is still easy to make a case that the bank owns the note even if they can’t find it. If they can’t find the original note, however, it’s harder for them to prove the original principle balance, the rate, and the amount the homeowners owes after however many months of payment or non-payment. This can help after the bank forecloses. In many states, the foreclosure isn’t the end. The bank often has the option of pursuing a deficiency judgment against the homeowner for the difference between what was owed and what they managed to finally sell the property for. If they can’t find the note, then they can’t really prove that the deficiency is as much as they say it is. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [May 25, 2010, 7:18pm UTC](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469/95 "2010-05-25T19:18:58Z")
The issue is simple - if anyone wants to foreclose on a property, they must prove to the court they have a right to claim that property. A bank is in the business of lending money in return for security such as mortgages on property. The requirement the court has set on them is nothing new; if they cannot do their core business correctly, they have only themselves to blame. As the Deusch-Bank link above shows, this could be due to sloppiness, poor training, a disregard for correct legal/paperwork procedures, layoffs, mergers, and stupid cost-cutting. Whatever - if they cannot do their own paper trail correctly, why should the court take their word that they correctly identify the properties, the people they want to toss out of their homes, etc.? The cost of all this legal mumbo-jumbo is built into the paperwork; the bank should have done it correctly. The suggestion is that the paperwork needs to be verified before the lawsuit is filed. The RIAA used a similar extortion tactic to file lawsuits against people trading music - file away, let the people spend their own money and hire a lawyer to prove the case is wrong. I assume at this point, there have been too many cases where people had to hire a lawyer, waste the courts time, only to find the banks woefully unprepared to proved their case. As the article mentions, in some cases several banks are disputing who owns the loan and filing duplicate foreclosures. Some are claiming they don’t have the note (“loss of note” claim) after 1 search of 1 filing cabinet - basically lazy and hoping the judge rubber-stamps it. A mortgage is registered at the land titles office at the time of issuance. However, if the mortgage obligation is bought, sold, sliced, diced, and passes trhough several hands, the final onwer or whoever is managing the packaged loan bundle, has to show they acquired the ownership from the original bank or issuer legitimately. This is what the abnks apparently are NOT doing properly. From the way I read it, the bank filing the suit must prove owenership before filing, so it will not reach the “being tossed out of court” phase until the bank is ready to demostrate its case. Presuming it is tossed on an ownership technicality, that technicality probably has to be satisified to refile. (IANAL) It’s up to the bank if it’s worth the hassle to chase down the correct paperwork. There is a provision in most property/real estate law (check with a lawyer who knows your jurisdiction) that squatters can acquire title if they use property unchallenged for 20 years. I.e. if you have openly used the premises and nobody has challenged your right to be their (on the grounds that it’s theirs) for 20 years, you can apply for title. Not sure if this would clear a mortgage that hasn’t collected on the property for 20 years. It’s meant to stop situations where someone presumes they have title to a piece of land, only to have someone come along and say “that clerical/survey error in 1870 means this is actually my land you are on. Thanks for the improvements…” I know of a situation where this happened in a small town; the mortgage company had a branch ofice in a boom town; during a problem time (recession and long strike) the local office closed in a very messy way, and some people had nwhere to make mortgage payments to. After 10 years IIRC (local law varies) they applied for and received title. As with anything, a lawyer is always a good idea. Squatter rights need to be continuous; not sure if subletting counts, probably not, for example. So yes, winning a free house due to bank incompetence is unfair to the honest, mortgage-paying diligent people. But then, like life, it’s a crapshoot. If your bank is carefulor lucky, all you get is a bad credit rating and no house; if you are really lucky, free house. In between, multiple court appearances and a lto of legal bils. [Previous page](https://boards.straightdope.com/t/new-rule-says-banks-must-prove-ownership-before-foreclosing/540469.md?page=4)