Bank Cannot Produce the Note = End of the Foreclosure Process for Some Lucky Homeowners

A fellow real estate agent stopped by my office the other day with a letter that had been sent to his clients from an attorney’s office. He wasn’t sure what the letter was about. Turns out that the first mortgage did not have a copy of the mortgage note and wanted the homeowners to sign a mortgage note so they could continue the foreclosure process. My advice to the agent was to tell the homeowners to NOT sign the note and get in touch with a competent real estate attorney immediately. It appears that the sellers may be able to remove the first mortgage lien, be absolved of the mortgage debt, avoid the foreclosure, sell their property and pocket the proceeds.

Homeowners facing foreclosure are receiving a simple piece of advice to help stall foreclosure: make the other side “produce the note.” As it turns out, many lenders seeking to foreclose seem to have lost track of the original promissory notes for the mortgages in question. Though by no means a long term solution, forcing the lender to produce the note can delay foreclosure proceedings and give the lender increased incentive to negotiate.

While securitized bundles of toxic mortgages have been blamed for much of our current economic malaise, there is one bright spot they offer to some homeowners facing foreclosure. When their original lender sold off their mortgage, and it got packaged, sliced and diced into securities sold all over the world, many times the original promissory note got lost in the shuffle.

Along with others, the Consumer Warning Network is actively pushing the “produce the note” strategy as an effective means of delaying foreclosure and creating additional incentive for lenders to renegotiate payment terms.

As described in Consumer Warning Network’s How-To, the strategy works as follows:

1. After you receive notice of a foreclosure suit from a lender who claims to own your mortgage, you file a request, with the court, for production of the original promissory note.
2. If the lender does not respond in 30 days, you file a motion to compel production of the note. This is a request that the judge order the other side to produce the note.
3. Most often there will then be a hearing where the judge will decide whether to force them to produce the note or not. Should you win, the lender can’t foreclose until they produce the note (which could prove very difficult for them). Should you lose, you would still have had the extra time in the home and perhaps the opportunity to negotiate with the lender.

Consumer Warning Network’s How-To includes free forms for requesting production of the promissory note, and also for filing a motion to compel. The group warns against scams offering “produce the note” forms for a fee.

Consumer Warning Network cites an increased tendency in judges to hold lenders to the letter of the law in the surging number of foreclosure cases, including the New York Times report of an Ohio federal judge who threw out 14 cases in 2007 when investors trying to foreclose could not prove ownership. April Charney, head of foreclosure defense for the Jacksonville, Florida Area Legal Aid also uses and strongly advocates the “produce the note” strategy. As reported in the Florida Union Times, she says that for some of her clients, it has put foreclosure on hold for years.

* “Produce the Note” How-To (Consumer Warning Network)
* How to Use “Produce the Note” in Non-judicial Foreclosure States (Consumer Warning Network)
* ‘Interlopers’ in mortgages find foe in Legal Aid (Florida Times Union)
* Securitization of Mortgages May Make Foreclosure Much More Difficult (The Real Estate Bloggers, November 2007)
* Watch Out for Foreclosure Scams (FindLaw)
* How to Avoid Foreclosure (FindLaw)