I have sucessfully used this defense several times in mortgage foreclosure actions as far back as the early 1990s whenever a “servicing agent” is the named plaintiff in the mortgage forclosure action. At the same time that I serve and answer to the complaint, I also serve a set of interrogatories and document demands that require the plaintiff to establish the paper trail from the original lender that gives the plaintiff the right to foreclose upon the mortgage.
And there lies the problem: Through a series of assignements, the right to receive payment under the note is packaged into an investment product with literally thousands and thousands of other notes, that is then sold to pension funds, insurance companies, mutual funds, etc., as an investment. The plaintiff in the mortgage foreclosure action is usually a servicing agent for the investors. However, neither the investors nor the servicing agent has received an assignment of the mortgage that secured the original debt. The last recorded mortgage is still in the hands of the bank that initially loaned the money or perhaps in an assignee bank, but rarely has the mortgage been assigned to the servicing agent, who is the named plaintiff in the mortgage foreclosure action, or the underlying investors, or even if the mortgage has been assigned, they can’t produce the documents to prove it.
Long sentence, but sums up the issue quite well. If someone fails to pay their mortgage, they risk foreclosure action, but that action must be brought by the entity that actually owns the mortgage. The court should not allow an action to go forward without establishing that simple fact.