Foreclosure Defenses : Who REALLY owns the NOTE?
Some attorneys concentrate on the Debtors' alleged default to win a case. There is a whole new way to win. Last year I wrote an article here about a Foreclosure defense based on MERS. Today I am widening the scope a little to focus on another problem (there are many) which could help those in foreclosure trouble. It will take a little patience and technical information to understand so bear with me.
When a mortgage loan is closed there are 2 critical documents signed by the borrower. One is the NOTE and the other is a MORTGAGE. It is hard to believe but the NOTE is really just a simple IOU form which unconditionally promises to pay a certain amount of money to the ORDER of the lender. Over the centuries this IOU became to be known as a Negotiable Instrument. Most people know about common every day negotiable instruments called "Checks." Checks and promissory notes are the two best known and used negotiable instruments around.
Well, the law says when a NOTE payable to ORDER is sold to another BANK it must be signed on the back by the first bank to transfer (negotiate), just like a check. No signature: no transfer. These laws are part of a law code called the UCC, which stands for the UNIFORM COMMERCIAL CODE. All 50 states have the UCC, and some have querky little rules like New York. Under New York's version, when the backside of the original NOTE is so full of endorsements that here is no more room for another endorsement, then an ALLONGE can be permanently affixed to it so there is more space to sign an endorsement. Not all states require the allonge to be permanenlty attached. Anyway the signature transferring ownership is called an endorsement. If there is no endorsement, the new Bank can demand the selling bank endorse it, but cannot sue the original maker. if there are some endorsements, but none naming the current Bank, then it can't sue. Even if the note is not lost, it must be correctly endorsed to name the current Plaintiff or the Plaintiff's principal.
VOILA! There in a nutshell is an explanation to the defense to 99.99% of all foreclosures. When the Real Estate Boom was flying high, the banks "electronically" signed the back of the NOTES but did not actually sign the original note. That was a BIG MISTAKE. The tall building lawyers must have been so giddy with all the fees they were making that they forgot about the need for an actual endorsement. The bank bringing the suit does not have the necessary endorsements from those prior banks on the back of the NOTE. An electronic endorsement is no good on a NOTE. Add to this the admission by the Florida Bankers Association that they decided to destroy promissory NOTES right after they were digitally scanned because they were afraid having paper NOTES laying around, they could get LOST. DUH!
So this new defense is popping up around the USA and is based on a simple fact: the paperwork is so messed up that the banks cannot tell who the rightful owners of these NOTES really are, and without that, there is no right to foreclose.
So, before you throw in the towel, pass this tidbit of info along to your foreclosure lawyer and make him read it! Good LUCK.
