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How to Fight Foreclosure – Part 1: Show Me The Note!

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Today on Legal Briefs we talk about the first defense in any foreclosure action – Show Me the Promissory Note!

If you are facing foreclosure – today we are going to give you a Legal Briefs overview of the one defense you must raise – Show me the Promissory Note.  This is actually very interesting issue for anyone with a home loan (even if you aren’t being foreclosed)  and one you absolutely HAVE to understand if you are going to fight to keep your home.

Let’s assume that hard times have fallen on you and you missed mortgage payments and the bank is foreclosing on your home.  I often hear people think of this as a black and white situation – I missed payments so they take my home.  It’s not that simple – when we talk about fighting foreclosure, 95% of the time we are talking about making things difficult for the bank so that the bank will come to the table and negotiate a loan modification or some other means of allowing you to keep the home.  This often works.  But what I can guarantee you is that if you do nothing, the bank will move forward and eventually this what happens is men and women with guns go to your home and you are left with an hour to pack up and go. 

Your mortgage is actually two separate legal documents – the Promissory Note and the Mortgage.  The Note is the promise you made to repay the money your borrowed from the bank.  The Mortgage is what attaches your home to the Note.   The Note alone means you owe the money to the bank.  But the mortgage is what allows the bank to take your home and sell it in order to pay back the money you own them.  Remember this fact with my simple joke:  “Why is a mortgage always attached to a Note?  Because it doesn’t want to be alone”  Get it?  A loan. Remember that joke because it will be very important soon.

I bought my house 4 years ago.  I signed a Note and a Mortgage with Bank A.  Literally 2 weeks after closing I received a notice that Bank B had purchased the loan and I needed to start paying the loan to Bank B.  In fact, your Note can be sold ten times while you own the home and there’s nothing wrong with that – it’s legal.  In more recent history though things have gotten more complicated as various Notes from various homes have been packaged up together and sold to investors.  The system is so complicated now that there’s like one lady in all the country who truly understands how it all works – and I’m not joking .. . Often, the loan has been sold WITHOUT YOU EVEN KNOWING IT.

But you signed only one Note originally and when some entity calling itself MERS shows up foreclosing on your home – how do you or a Court know that the entity foreclosing on you actually currently owns the Note?  The general idea of the show me the Note defense is that the Bank or foreclosing entity must show a chain of custody – from the Original Note you signed, often years ago, to the current Note being foreclosed on. 

Everytime the note is sold there must be an assignment of the Note and Mortgage to the new bank or whatever it is that is buying the loan.  Think of it like a football trick play with multiple laterals of the ball – every time a player hands the Note off to another player there has to be a signed document. Football makes everything cool.

So in our video example there were eight lateral transfers of your Note and the bank would have to bring to Court eight different assignments signed by all relevant parties.  The bank can’t just show up with the final transfer from Bank #7 to itself and run into the foreclosure touchdown– it has to prove all the prior transfers leading back to the one you originally signed with Bank #1.    But but – these are large banks, big companies, surely we should just trust that they are the final owner of the loan right?  They would never commit fraud or do anything unethical?  Right (enter in sarcastic tone).  I’m not going into it but just Google “mortgage robo-signing scandal” and you’ll see why we have to make the bank prove they are the proper party holding the Note.

So how do you raise the Show Me the Note defense?  Be careful, Courts have been making the defense more and more difficult to raise.  In US Bank N.A. v. Nelson 2019 – the New York Appellate court held that it was not enough to simply deny that the Bank was holder of the Note.  The Defendant homeowner had to raise the issue as an Affirmative Defense.  And this is the general movement in the Courts about this issue – the Defendant-homeowner is being placed in the position of having to somehow shift the burden of proof to the bank to prove what really should be the bank’s burden.  It is an unfortunate shifting of the burden of proof but it is happening out there so be careful.

Likewise, the general rule in the past has been that the Bank would have to be in possession of the original signed Note in order to foreclose but more recently the Courts have been allowing banks to get away with “lost note affidavits” in which someone at the bank swears under oath that they HAD it, but have misplaced it somehow.  Again, an unfortunate shift in judicial opinion but the Bank STILL has to prove a clear chain of title up to the present day.  See Hines v. New Urban Pine Road which is a 2018 case out of Florida.

This is a big deal because it’s the easiest thing in the world for your mortgage docs to be copied and digitized nowadays.  There are probably a thousand copies of your loan docs floating around out there.  How can a Court know who the true holder is or make sure that there wasn’t a mistake?  Well, the sad truth is that some Courts have just made a decision that they are going to give a pass to the banks and take them at their word.  And here is the walk of shame – the states which allow people’s homes to be taken away based on “trusting” the bank? Arizona, California, Idaho, Minnesota.  If you want to see some crazy jurisprudence take a look at Hogan (no relation) v. Washington Mutual Bank.  Basically, the Court said that because the legislature didn’t require proof it was going to throw out everything lawyers are taught in Evidence class in the first year of law school.  It was a stunning abdication of judicial duties but … anyways – I better say no more before I get in trouble.

Okay so, I hope now you have a general understanding of what the Show me the Note defense is all about.  But it’s just one defense of many and I hope in Part Two of this video to talk to you about Truth in Lending and other technical violations you might be able to raise in your fight to keep your home.  Best of luck and thanks for watching.

Jeremy Hogan
Jeremy Hogan
Attorney Jeremy Hogan is a partner at Hogan & Hogan.