New foreclosure defense: Prove I owe you

[Robert Mack]

Some homeowners who are about to be foreclosed on are asking banks to provide the original loan paperwork to prove that they owe the bank money and the banks don't have the documents! so everything comes to a standstill.

My question is do they just stay in the home without any consequence until this is resolved? no payments or anything???

http://www.msnbc.msn.com/id/29242063/

[Mitsu O'Riley]

They have to submit the paperwork for the summary judgment hearing. That is the first hearing. If they don't have their docs in order, then they have to request a hearing once they have filed the paperwork with the clerk of courts. If the paperwork is wrong, then I suggest the owners get an attorney. There are many cases in which the banks have been told they can't foreclose. Which basically means they don't have recourse for non payment.

[Jon Holdman]

So, if you force the banks hand, and they can't track down the proper paperwork, you suddenly own your house free and clear? No clouds on your title from an unreleased lien? I find that hard to believe.

[Account Closed]

That does sound weird. Many people pay online. Isn't that enough proof? Probably in that case.

[Joshua Dorkin]

I think they are still figuring all of this out. If that were the case, this might get even worse . . .

We'll see a trend where homeowners and investors make them (the lenders) produce the note . . . if they don't, they stop paying the mortgage.

We'd lose all the banks then!

[Robert Mack]

The thing I find funny... or sad.. is that the state rep. saying.. "Don't leave your home" if they can't find the note.
And then they go, "The banks are failing!! We need the bailout money!!"

[Lee Common]

Robert Mack,

I have been advising my clients to do this for over a year.

It is good for slowing down the process while negotiating a short sale while allowing the homeowner to stay in the home yes payment free.

Usually in the past eventually the bank come up with the docs.

Lately however I have been seeing banks send copies of original docs to the owners though, just to let them know they have it so don't try it!

It's little more than a roll of the dice, however usually worth making the request in writing. At the very least if you do it the week before the auction you will generally get another month to figue out what your going to do!.

[Robert Mack]

Have you had any cases where the bank hadn't found the original docs?

If they have truly lost them, then what happens?

[Mitsu O'Riley]

Originally posted by Jon Holdman:

So, if you force the banks hand, and they can't track down the proper paperwork, you suddenly own your house free and clear? No clouds on your title from an unreleased lien? I find that hard to believe.

You don't own the house free and clear. The liens are still on there. The liens were placed at closing by that lender. How many times did the loan get sold? How many of those times was just the servicing sold? If the bank wasn't responsible enough to keep track of it when they were making hand over fistfuls of money, then they should have to come up with the documents to support their lawsuit (foreclosure). The money is still owed, and payable to the servicer for whoever now owns the note. Maybe a little town in Iceland?