As mortgage loans went from local banks to securitized "securities", determining the actual owner of an individual mortgage has become more difficult. Worse, as the mortgage loan passed from owner to owner, ultimately to bundling huge numbers of mortgages sold to thousands by brokerage firms, the original note may have been lost in the shuffle. Many of the originating lenders have gone out of business, sold, closed or filed for bankruptcy.
Bloomberg posted a provocative article today revealing that "judges in at least five states have stopped foreclosure proceedings because the banks .... haven't been able to prove they own the mortgages." Many parties filing a foreclosure action have submitted eitherIf the owner or owner's attorney does not object, the foreclosure has often proceeded.
- a copy of the mortgage note or
- filed a "lost-note affidavit".
The article tells of one homeowner with a $1.5 Million mortgage who hasn't made a payment since 2002 and has successfully stalled the foreclosure because no one has been able to produce the original note.
Some judges have dismissed foreclosure cases when the original note can't be produced. Other judges have warned plaintiffs to bring the original mortgage notes, not copies, and not lost-note affidavits.
Bloomberg estimated "more than $2.1 trillion, or 19 %, of outstanding mortgages have been bundled into securities."
With vacant and abandoned homes already creating problems for cities and neighborhoods, what will this add to the problems?
Sub-prime loans ... Upside-down homeowners ... Government bailouts ... Now "unforeclosable" loans?
What next?
Hi Sharon,
VERY interesting post, thanks for the info. We do them a little differently here in CA, so I'm not sure how applicable this is to our trust deeds vs. mortgages. Almost 100% (yet not all) foreclosures in CA are not done through the courts.
As for lost note, I lost one myself many years ago, (very small note) and posted a lost instrument bond, that was it as far as I can remember. BTW, I would imagine that a least 19% of the paper has been bundled.
I'm not quite sure how the foreclosures are done here in Michigan. I'm still 3 months away from losing possesion. Is there a way to ask the lending institution if they have the origanal note? and then I would have to travel to the location to see it? Is my best option to wait for the court date. It's not like us home owners have alot of experience with this type of thing and few people know the answers.
Hi, George - I just send you an e-mail responding to yours sent to me. I'm not familiar with the laws in Michigan and recommend that you talk with a Michigan attorney who specializes in real estate. Good luck.
Hello Sharon, One has to wonder about this. I've heard of this happening a couple of times, but not in the numbers you are talking about. The credit and mortgage crisis gets stranger by the day.
Ruthmarie - it certainly does. We do live in Interesting Times.
i was foreclosed on, i found out about asking the lender for the note very late in the game. I served a demand on my lender to produce the note, they had thier attorney respond to me with an eviction notice. I retained an attorney and going to court in the morning with a counter claim. Im asking them to produce the note, and they made a filing error, so hopefully it will resend the foreclosure. I also have a well documented case of all the actions I took to work with my bank and they kept telling me they didnt have my loan. I also got a affidavit from Acorn housing to back up my claims. We will see how this goes.
I have also been digging in to the Jerome Daly case (google it) I have decided not to make it easy on the lender.
How can a bank file an eviction notice against you if they don't own the property? They can't.
Sharon, I'm so w/ you... I am a real estate agent here in CA and once I've learned about lost mortgage notes and that banks has NO RIGHT to foreclose on these homes, I've immediately told my distressed homeowner clients about this program and how they could qualify to compel banks to renegotiate their loans w/ the current market value of the property w/ the interest rate that they could afford for years and years to come. Check this website: www.usjusticefoundation.org and there is now an office here in Stockton for U.S. Justice Foundation. Give me a call or email, let's team up so we can help distress homeowners save their homes.
If your house has already been foreclosed, still living in the house currently. Only paper-work has been seen is from Long and Foster (realtor) who is supposed to be handling this case. Long and Foster is saying that they would pay me $3000.00 to vacate the premises in 30-days. My question pertains to the Original Mortgage Note. Can I hold -up this process with the question of "Do You have the Original Mortgage Note?" Or is it too late for anything else to be done? This is in the state of Va.
William - that would be a question for a Virginia attorney.
See what's happening in Maryland.
Maryland Court Of Special Appeals.
ANDERSON vs. BURSON
LOST NOTE AFFIDAVIT.
Plan to take case to SUPREME COURT