A lawyer told my husband and I that if a mortgage company cannot produce the original note for the house, they cannot foreclose on your home. Is this true?
2 Answers from Attorneys
Mike: How helpful....not!
Bank has to prove "standing," i.e. ownership of the note. During the Bubble, mortgages were commoditized, securitized, and the notes delivered to a very few banks (LaSalle I think is still #1) who promptly lost them.
One way for "you" to prove ownership of the note is to produce the original and show it is payable to you or endorsed to you; or you have the note and an assignment agreement running to you; or there is a recorded assignment of the mortgage to you. Or if you are the originator of the loan and the mortgage is recorded.
Yes, they usually have to find the note because 99% of residential mortgages were securitized and the custodian lost the note. It's always worth "kicking the tires" in a foreclosure suit.
If you win one of these, the whole mortgage balance has to be recognized as "income from discharge of indebtedness," so you still will need lots of legal work :-( but you'll probably be able to keep the house.
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