Cristiano

If you are facing foreclosure on your home, a little known legal tactic can help to delay or even stop foreclosure. Demand that the lender produce the original mortgage note, which they are legally obligated to do in order to prove the debt exists.

Who Owns Your Mortgage? "Produce The Note" Movement Helps Stall Foreclosures

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Gigs

Or you could, you know, just pay the debt that you owe. Just a thought.

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"It is the paramount duty of governments and of politicians to secure the wellbeing of the community under the case in the present, and not to run risks overmuch for the future" - JM Keynes

Serene S.

You still have to eventually pay, but it is a good way to buy time for some people to work something out. They will find the original note at some point, but until they can produce it, they can't foreclose on you. That gives the homeowner time to make payments against what they owe. It's particularly helpful for those who have lost jobs and had to make the hard choices on what to pay when.

This could actually work for just about any debt, I believe. You can request any creditor to produce original paperwork signed by you which proves you are the debtor. In this age of computers, and bank mergers, re-mergers, etc, finding the original paperwork can be time consuming and sometimes downright impossible.

Sarah Nerd

Yes because it's always just that simple and there are no legit reasons anyone should ever reach that point and the lenders never make errors.

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Humps

A couple of years ago I might have agreed with you but not so much now.

Whilst of course ethically and morally you are right it falls down a little when only one party in the arrangement are expected to play by those rules. As far as the banks are concerned they are under no obligation to deal with you ethically (and morality rarely enters into the equation at all).

We are all conditioned that if you borrow money you pay it back, if you enter into a contract you fulfil your side of the bargain and because we are individuals, with conciences we tend to stick to the rules even when the rules are stacked against us.

We still play by the same rules that worked just fine when you saved with the same bank from cradle to grave, when your bank manager knew your name and when your relationship with the bank was what mattered and not if or not you manage to tick enough boxes on a credit score form. I can bet that if you even know who owns your bank they don't know at any level that matters who you and care even less.

Which would all still be fine and dandy (the world changes after all) except that the banks are one of the more complicit of the players that have almost brought the world economy to disaster. They played fast and loose in a way they would never have allowed us to and they lost.

Again that's ok ....it has happened before and it will happen again EXCEPT that this time the taxpayer got to bail them out for their excesses. We got to foot the bill for their inefficiency. We got little choice in the matter of course but the fact remains that we had to bail them out in a way that had the tables been reversed and you were sat in your bank explaining that you 'lost money you never had in bad investments that you thought were a sure thing' would have you laughed out of there.

SO yes, if you find a stick to belt the bastards with then pick it up and hit them hard because sure as hell they have clobbering you with it for a very long time.

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Gigs

I disagree with this as well. (Not with you, with the idea that we should bailout anyone anywhere) Two wrongs don't make a right. The entire basis of our economy is eroded when money and debt are fast and loose. As you pointed out, it always seems a little faster and a little looser if you are a big business.

Cincia Singh

I can agree as long as fast = deceitful and loose = criminal.

What they did was to use sham credit rating divisions within their own institutions to rate the securities AAA, then foisted them off on each other as valuable assets that could back up loans and be sold to raise cash for payments if need be.

When "too-big-to-fail" companies do this it's called "cutting edge" or "novel accounting" and they get bailouts. When we the customers do it to them it's called wire fraud and theft and retirement includes buying "soap-on-a-rope." They get bailout, we pay the bill, their exec's retire on golden parachutes.

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Trout Recreant

This, unfortunately, rarely works. Or fortunately, I guess depending on what side you are on. By the time the debt reaches the point where a foreclosure is started, there is probably very little that anyone can do to stop it. Also, there are two types of foreclosure, and people in different states tend to confuse them. In the West, non-judicial foreclosures are much more common, except in the instance of agricultural properties, and in the East, the instance of judicial foreclosures is much more common.

The basis for this is the acceptance of deeds of trust as collateralization instruments. The East was settled first, and was much more heavily populated for much of our nation's history. There was a strong court system there. Therefore, the normal mortgage worked out just fine, and if there was a need for a foreclosure, the secured party had access to the courts for relief. Mortgages can only be foreclosed through the courts.

In the West, the court system was spotty at best. Circuit judges rambled around on horse, showing up whenever they got there, and then took whatever cases they could until they left for the next town. The powers that be recognized that they didn't want armed gangs of thugs taking the law into their own hands and just tossing people out of their homes, so the deed of trust was created. On the West Coast, mortgages are very rare. What most people call a "mortgage is a promissory note secured by a deed of trust. Deeds of trust can be foreclosed non-judicially. That is, without court intervention. The difference is that in a judicial foreclosure, the process is quicker, and the lender can take a deficiency judgment if the property is not worth the amount of the loan. There is also a period of time in which the borrower may cure the debt and retake possession of the home following the foreclosure.

In a non judicial foreclosure, the period of time that it takes is usually 190 days at a bare minimum, and realistically, it is closer to 250. The requirements for notice are very strict, and at least in my state, just got much, much stricter. There is no cure period. Once the foreclosure is complete, the new owner has an absolute right to the property, and after a notice period, may evict the former homeowner. Additionally, there is no deficiency judgment, so if the property is not worth the note value, the lender is out of luck. This is a very common occurrence, especially with lower priority liens.

The bottom line is that 1) lenders are on to this trick and know to have the original note available within the 190 - 250 day period, and 2) even without the original note, there are still several other recourses that lenders have to collect on the note. Relying on tricks like this is bad advice. If someone cannot make their mortgage payments, there are other options. They can, quite often, save their home in bankruptcy. Protecting the roof over your head is priority one. If your home is foreclosed on, you need to go find a place to rent, and that's going to cost you as well. Plus, you might have difficulty finding someone to rent to you with the foreclosure on your record. Deeds in Lieu are also problematic unless the property is being used for non-residential purposes. Short sales - same problem. So, you short sell, and then have a massive ding on your history. You aren't getting a new mortgage any time soon, and you have just tossed away whatever you had invested in the property, so you will lose whatever you could have gained when the market came around. Professional property managers will not want to rent to you. Bankruptcy would have been a better option.

My experience with banks is that they hate foreclosures and are not equipped to handle them at all. That includes the big banks as well. Just try to set up a trust with property in it and find a bank to administer it. They just don't like dealing with real property. They are usually likely to rework a loan or accept a smaller payoff and let you keep your home. I've worked with both Fortune 500 banks and with small local banks in my career, and my experience (and this is just what I've seen, so it has no statistical relevance) is that the local banks are much, much more likely to work with someone and find a creative solution than the big banks are.


tl:dr. Cliff Notes. Asking for the original probably won't work West of the Mississippi, and is unlikely to result in any significant delay in the East.