Posted on 02/19/2009 3:05:01 PM PST by Notary Sojac
ZEPHYRHILLS, Fla. — Kathy Lovelace lost her job and was about to lose her house, too. But then she made a seemingly simple request of the bank: Show me the original mortgage paperwork.
And just like that, the foreclosure proceedings came to a standstill.
Lovelace and other homeowners around the country are managing to stave off foreclosure by employing a strategy that goes to the heart of the whole nationwide mess.
During the real estate frenzy of the past decade, mortgages were sold and resold, bundled into securities and peddled to investors. In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed.
Persuading a judge to compel production of hard-to-find or nonexistent documents can, at the very least, delay foreclosure, buying the homeowner some time and turning up the pressure on the lender to renegotiate the mortgage.
"I'm going to hang on for dear life until they can prove to me it belongs to them," said Lovelace, a 50-year-old divorced mother who owns a $200,000 home in Zephyrhills, near Tampa. "I'll try everything I can because it's all I have left."
In interviews with The Associated Press, lawyers, homeowners and advocates outlined the produce-the-note strategy. Exactly how many homeowners have employed it is unknown. Nor is it clear how successful it has been; some judges are more sympathetic than others.
More than 2.3 million homeowners faced foreclosure proceedings last year and millions more are in danger of losing their homes. On Wednesday, President Obama will unveil a plan to spend at least $50 billion to help homeowners fend off foreclosure.
Chris Hoyer, a Tampa lawyer whose Consumer Warning Network Web site offers the free court documents Lovelace used to file her request, has played a major role in promoting the produce-the-note strategy.
"We knew early on that the only relief that would ever come to people would be to the people who were in their houses," Hoyer said. "Nobody was going to fashion any relief for people who have already lost their houses. So your only hope was to hang on any way you could."
Tom Deutsch, deputy executive director of the American Securitization Forum, a group that represents banks, law firms and investors, dismissed the strategy as merely a stalling tactic, saying homeowners are "making lawyers jump through procedural hoops to delay what's likely to be inevitable."
Deutsch said the original note is almost always electronically retained and can eventually be found.
Judges are often willing to accept electronic documentation. And lenders are sometimes allowed to produce other paperwork to establish they are the holder of a loan. Still, assembling such documents to a judge's satisfaction takes time, which to homeowners is the point.
Lovelace filed her produce-the-note demand last fall after the bank acknowledged that her original mortgage document had been lost or destroyed. Since then, there has been no activity on the foreclosure — no letters from the lender, no court filings.
The law firm handling the foreclosure for the lender refused to comment.
A University of Iowa study last year suggested that companies servicing mortgages are often negligent when it comes to producing the documentation to support foreclosure. In the study of more than 1,700 bankruptcy cases stemming from home foreclosures, the original note was missing more than 40 percent of the time, and other pieces of required documentation also were routinely left out.
The first big success of the produce-the-note movement came in 2007 when a federal judge in Cleveland threw out 14 foreclosures by Deutsche Bank National Trust Co. because the bank failed to produce the original notes.
Michael Silver, a lawyer for two of the families in that case, said at least one eventually lost their home. Still, he considers that a success.
"From the perspective of the person who's in the home, you may have kept them in the house another 10 or 12 months," he said. "If I can get a result with economic benefits to a client, then I think I won."
Democratic Rep. Marcy Kaptur of Ohio endorsed the strategy in a fiery speech on the House floor during debate on the federal bank bailout last month.
"Don't leave your home," she said. "Because you know what? When those companies say they have your mortgage, unless you have a lawyer that can put his or her finger on that mortgage, you don't have that mortgage, and you are going to find they can't find the paper up there on Wall Street."
April Charney, head of foreclosure defense for Jacksonville Area Legal Aid in Florida, said the strategy has been so successful for her that she now travels around the country to train other lawyers in how to use it. She said she has gotten cases delayed for years by demanding that lenders produce paperwork they cannot find.
"This is an army of lawyers getting out there to stop foreclosures so we can get to the serious business of creating solutions," Charney said. "Nothing good is going to happen as long as we continue to bleed homeowners."
Interesting tactic, but don’t forget that she owes the money!
I see. You owe nothing, because a lawyer said so.......
sounds like theft
It is just a delay in proving who owes on the property, not who OWNs it. The liens filed in court will show someone other than the tenant owns it. It may not be the one with the current debt load, but the homeowner still can’t clear it. Eventually the paperwork will be tracked down or deposed legally. Forestalling like this only lengthens the end. Were all this happening under a different administration I’d say it was immoral. However, given the absolutely unfair and unethical legistlations these baboons have just enacted, MORE POWER TO THE TACTIC!
She’s a thief.
The legal point is that it is no longer clear to whom the homeowner owes the money. If the note was assigned to someone else, and the debtor pays the original creditor, she could get sued again by the assignee. So a good lawyer for the debtor will make sure that the creditor who is suing is still the owner of the note.
If you want to confiscate a secured property, you have to prove you are entitled to it. That's what being a nation of laws is about.
It’s theft.
It is theft of compensation for use; in the end, ownership (unless Zer0 outright seizes it and gives away) will be assigned to the rightful owner.
Of course, there would have been no story here if the original issuer of the note had held onto it for a few years. Like they used to. In America.
It’s true. I spoke to quickly. It’s not theft necessarily.
It’s certainly attempted theft.
This will result in higher costs to the lender which will be passed on to other consumers and reduced investor profits. The bank needs the proper paperwork but if the occupant (not owner) doesn’t live up to the terms of the contract they have to give up the banks property. These folks are advocating theft, pure and simple.
Since when do they get to take legal action without producing paperwork?
This is exactly what every last person who has this situation should do. If these guys are throwing around funny-financial instruments without taking care of their paperwork, then they deserve to either lose the case or have it thrown out or delayed for as long as possible.
I know when I had to deal with this kind of paperwork in court (for apartments, in my case), that if I didn’t have all my paperwork in order, I would lose. I didn’t ever lose, because I did make sure it was in order. That’s the responsibility of those guys who are carrying the mortgage. If they don’t have it in order — they should lose the case. It’s that simple.
Right there with ya on that....
EXCELLENT.
A simple request shows up how the whole damn con scam game worked.
If you can’t show mortgage ownership, how can you foreclose.
More power to them.
**** the Bankers!
Succinct and on point.
I think the record of her payment of the loan for who knows how long ought to be sufficient proof. Perhaps they could use discovery to obtain a copy of the note from her, or use interrogatories to investigate just why she made payments on a note she now denies (by force of logic) having signed.
It’s attempted theft, hiding behind the technicalities of the law.
That is not liberty and it will make slaves of the rest of us. Terrible.
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