Note produced and Mortgage is not: Several possible answers:
- Mortgage itself is not required in original form but a certified copy of what is recorded is required.
- That they do not have the original stamped copy is indicative but not proof that the mortgage was assigned or transferred in some way. Therefore you want someone with personal knowledge to swear what happened to the mortgage and specifically whether it was assigned, transferred, hypothecated or whether any instrument was executed by the named mortgagee that effects the terms, rights, obligations, ownership or control over the disposition of the mortgage. Put another way: who is it that could execute a satisfaction of mortgage that would satisfy a title expert?
- Original Note produced. Several cases where the “original” was a forged copy of the real original. Check with borrower to determine if it is their signature and whether all borrowers signed.
- Just because someone physically has possession of the note does not necessarily mean that they own it — but that raises a strong presumption which can only be rebutted by some proof of either a pattern that the mortgagee and payee on the note admits to regarding selling, transferring etc the note, or some documentation from the mortgagee files that shows that they only retained the rights to service the mortgage and received some payment for the full balance of the note or part of the balance of the note plus a “premium” which amounts to an undisclosed fee (TILA violation).
- It is probably true in many cases that any number of people got possession your borrower’s note without any rights to it in the process of multiple assignments. Transfer of possession implies transfer of ownership and rights but that is a presumption, not black letter law. So if you show that that going up the line that A transferred to B who transferred to C who transferred to D and the note is in B’s hands, B has no right to enforce the note or foreclose the mortgage. B lacks standing and they have not joined the real party in interest. They are at most a nominal plaintiff. Even if the statute allows a nominal plaintiff in possession of the note to enforce the note and foreclose on the mortgage, they cannot do so without someone having personal knowledge and authority to state that the note is in default and that the nominal plaintiff is instructed to enforce. But in our example if C instructs nominal Plaintiff B and the note and mortgage are held by D then the standing and real party in interest problem still exists — the Defendant could still be sued again by the real party in interest for a double collection, thus the action must be dismissed with prejudice.
- In the securitization process, co-obligors (other borrowers) are created in the merger that results by pooling the mortgages and notes and terms are added, which is what happens when a 12% note is sold to an investor as 12% but it only provides for a 1% option ARM payment. Thus if the investor (owner of asset backed security) is in fact getting paid in full, then it is difficult if not impossible to say that one specific note is in default even if there is no evidence of borrower payment, because of the obvious intervention of third party payments.
- “Assignment” of the note must usually be accompanied by physical delivery. But in the securitization process this rarely occurred resulting legally in the Mortgagee/Payee receiving payment in full for a pool of mortgage notes that includes some reference to your borrower’s note. That being the case, the note is paid, the security is severed, and the party who now “owes” on the note is the Mortgagee/Payee who assigned for payment the ownership to a third party who in turn did the same thing. The “default is not that of the borrower anymore because a third party intervened and paid the full balance. This follows the same logic and theory that happens in a refinancing: the mortagee/payee on one mortgage note is paid by a third party. If the third party fails to record a valid assignmentof mortgage or a new mortgage under the laws governing recording, then there is no encumbrance. If the reason the third party paid was because of some deal with the original borrower then the new lender may have a cause of action for an unsecured debt. But in the securitization process the “new” lender is not even disclosed to the original borrower. That they chose to pay off the note is their problem and between them and the seller or their attorney who should have documented the transaction properly.
- Rules of evidence in each jurisdiction vary somewhat when it comes to negotiable instruments, assignment, delivery and recordation, so it should be checked both with state and statutes and even with one of the more experienced recording clerks in the county where the property is located.
Filed under: CDO, Eviction, foreclosure, GTC | Honor, Mortgage | Tagged: evidence, foreclosure defense, hypothecate, original mortgage, original note, personal knowledge, recorded, securitization, transfer |