Fast growing foreclosure defense strategy - Produce the Note

A growing number of homeowners around the country are using a foreclosure defense that may help them retain their homes called "Produce the Note." When a lender can't produce the original note, allowing a foreclosure to proceed puts the homeowner at risk of owing that debt again to another party in the future.

What if Your Lender CAN'T Produce the Note?

If a lender wants to foreclose, it has to show that it is, in fact, the appropriate party to whom the money is owed. That right to foreclose belongs ONLY to the party who has legitimate POSSESSION OF THE ORIGINAL NOTE - not a copy, not an electronic entry, but the original note itself with the original signature of the person(s) who allegedly owes the money along with appropriate raised notary seal and signature. So, any homeowner faced with foreclosure has every right to demand the lender first prove to the Court that they have the legal right do to so by proving they have legal possession of the original promissory note.

What the Lender Must Do

Often the lender claims it has lost or destroyed the original note. If the lender is making such a claim, the law requires them to prove all of the following under the "Uniform Commercial Code." The UCC contains a specific provision on this subject (Section 3-309) which states a lender can enforce a promissory note without having the original, BUT only under certain limited circumstances.

1. The lender has to swear and attest that it no longer has the original note;
2. The lender has to prove that it was properly in possession of the note and was entitled to enforce it WHEN it lost possession of the note;
3. The lender has to prove it didn't "lose" possession simply because it transferred the note to someone else (i.e., it's not really lost); and
4. The lender has to prove that it cannot produce the original note because the instrument was destroyed or its whereabouts cannot be determined or it was stolen by someone who had no right to it.

All of these matters have to be definitively proven by the lender. It is not the obligation of the borrower to prove or disprove anything. The borrower can challenge the right of the lender and demand proof.

The Court's Important Role

It is up to the Court to determine whether the lender has satisfactorily proven why it no longer can produce the original note. The Court also has to be satisfied that when the original note was lost, the lender had legal possession of it at the time it was lost. Until the Court has been satisfied of all of this, the foreclosure cannot proceed.

It is also important for the Court itself to understand that this issue is not merely a "technicality" and the judge should not be satisfied with anything less than full proof of this issue. The Court itself needs to appreciate that if it should agree that an original note has been legitimately lost (and allows the foreclosure to proceed) it is the borrower who is still at risk.

Incredibly, even if a Court has found that the original note is lost and the foreclosure sale is finalized, if someone later turns up with the original note and proves that it is the proper holder of the note, and not the lender who foreclosed on the property, the original borrower is STILL LIABLE.

Your lender took back your home and the Court allowed it because it believed they proved the note was lost and it was the proper party. Then someone legitimate shows up with the actual note and you still owe that person the money even though your property was taken with the blessing of the Court. This is a very serious issue regarding post foreclosures and post pre-foreclosure short-sales.

An overwhelming percentage of mortgages granted over the last 3 to 5 years have been packaged into securities and re-sold and re-assigned numerous times since the inception of the borrower's original note and mortgage. In some states, homeowners have better than a 50/50 chance of being successful in defending themselves against a completed foreclosure.