Legal Question in Real Estate Law in California

Technically they may not be able to foreclose on your property without the original document showing your debt to them. Several months ago a court on the East Coast denied 100's of foreclosures for that reason.

Under California law they would eventually be able to foreclose. They would have to produce some proof of the debt in the form of admissible evidence. A debt doesn't automatically disappear just because the original note is lost or destroyed. It just becomes an evidence issue. Where the lenders have been slapped is where they have tried to foreclose without legal proof of the debt and that the foreclosing lender actually owns it at the time of foreclosure. If they line up their admissible evidence they have no problem.

Attorney McCormick is correct. In California, the Courts have not yet definitively ruled that the lack of the original promissory note prevents the lender/servicer/holder from enforcing the terms of the note. Further, in California most foreclosures are non-judicial, which means that a Court is not involved to review the documentation for the loan unless you file suit to enjoin the foreclosure proceeding. You need to consult with a local attorney who specializes in mortgage litigation - this is a terribly complex issue, and not one that a non-attorney, or for that matter even an attorney without experience and knowledge in this field should attempt to tackle.

*Due to the limitations of the LawGuru Forums, The Gibbs Law Firm, APC's (the "Firm") participation in responding to questions posted herein does not constitute legal advice, nor legal representation of the person or entity posting a question. No Attorney/Client relationship is or shall be construed to be created hereby. The information provided is general and requires that the poster obtain specific legal advice from an attorney. The poster shall not rely upon the information provided herein as legal advice nor as the basis for making any decisions of legal consequence. As required by 11 U.S.C. �528, we must now disclose that, "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. Assistance we provide with respect to Debt Relief may involve bankruptcy relief under the Bankruptcy Code."

(1) In California, a foreclosing financial institution can put up a bond to protect against the possibility of another party showing up with the note later on;

(2) The recorded deed of trust is excellent evidence of the date, amount and payee of the note as of the time the borrower signed it; when the payees/beneficiaries change, the buyer and seller will testify that the sale and assignment occurred.

(3) If necessary, the beneficiary would foreclose judicially, put you on the stand as a witness, and ask numerous embarrassing questions about your unpaid obligation.

(4) Finally, these financial institutions aren't in the practice of shredding promissory notes. Most of the notes still exist, somewhere. If push comes to shove, they'll search and maybe find your note.

The "where's the note" defense is not a real defense at all. In California, the security instrument of choice is the deed of trust. The lender does not have to deliver the actual promissory note to commence nonjudicial foreclosure through a trustee's sale. California case law has held that symbolic delivery is sufficient.

The "where's the note" defense arose in Florida, which uses mortgages, which can only be foreclosed by filing a lawsuit. Historically, the defense arose when the party suing for foreclosure of a mortgage claimed standing by way of an assignment. In California, as in other states, transfer of the debt carries with it the security, by operation of law. The defense has only been recognized in California in cases involving actual litigation, and then only in matters involving assignments.

There is a statutory procedure for requesting what is known as a beneficiary's statement. But it only provides that you may receive a copy of the promissory note, not the original note, which remains in the lender's possession until it is either foreclosed on, or paid in full.