If you’re being sued by your lender for not paying your mortgage, you may be able to save your home by using the “Produce the Note Strategy“. In a nutshell, some homeowners have actually gotten rid of their mortgages because the mortgage company couldn’t produce the mortgage note.
The problem arises from the constant sale of mortgages on the secondary market, for instance Fannie Mae and Freddie Mac. When a bank sells a note or if a bank takes over the assets of a mortgage lender due to mergers, the tracking of sale and assignment paperwork is largely kept through the MERS system. “MERS” is Mortgage Electronic Registration Systems, Inc.
Quoting from the MERS website, “MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.”
In the last few years, there have been numerous mergers and acquisitions between the major mortgage lenders and banks. Despite the high tech record keeping, often the documentation and paperwork on sold or acquired mortgage loans has been lost. If a note is not readily found in a mortgage file, MERS is the first place lenders will look to try and recover the note.
If a foreclosure situation arises, and the note can not be produced, mortgage lenders will try to establish ownership by filing a court motion invoking a law called “re-establishment of the note”. In this document, they actually admit the note was lost and they ask the court to re-instate the note in the name of the current lender. Here’s an example of a restablishment of note.
Despite the occasional internet legend, it’s pretty rare that a mortgage borrower will wind up with a free home if their lender can’t find the note. Many states provide lenders with legal remedies to preserve their rights to be note holders even when the paperwork is lost or destroyed.
Using the “produce the note” strategy is still useful, however, as it will definitely slow things down while the legal process drags ons. This may give you a chance to get back on your feet and perhaps gather the funds to get current on your mortgage. More likely, you can use the lack of evidence get a bargaining chip to reduce your interest rate significantly with the lender.
So how do you fight the lenders? This website has sample templates and legal motions that you can use to force the lender to produce the note before foreclosing on your property.
Unfortunately, the “produce the note” strategy only works for situations in which you are actually being sued for non-payment, not just foreclosed upon. In some states, foreclosure is possible without court.
Have you been sued during a foreclosure by a lender who has lost the mortgage note? Tell us about it by leaving a comment!
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This is something new to me and I think it is great information with one caveat. It’s really important that people understand this is not a method to try to get out of a legitimate debt, but a good stalling tactic. In reading the hyperlinks to this blog, it’s obvious that if people are not careful, they can get hit twice for the same debt. They also need to understand that when they signed the note, available or not, it is still their obligation to take care of their part.
I am a home owner in forclosure—the mortgae co has filed with teh court an affidavit of lost note. Since this has happened they sent me aletter stating that my aplication for modification was under review–however i have never completed that aaplication, this loan was transfered 3 tmes. they have as of yet not persued any further but it is a terrible feelig waiting for the other shoe to drop. MY attorney has tried contacted there attorney and states he will get with his client but a couple months has gone by with no response. what do I do????