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Who Can Foreclose?

There used to be a time when you borrowed money from a bank for a mortgage, you made your mortgage payment to that bank. Eventually, the banks decided to bundle and sell off your mortgage to other banks, or to other entities known as loan servicers. So although you may have borrowed money from your local bank, a new company may have stepped in and directed you to start making your mortgage payment to them. While not illegal in of itself, when your mortgage is passed around from one entity to another, the paperwork behind all of those transactions could be a little sloppy. It’s when the paperwork gets sloppy that short cuts are taken. However, just because a bank or servicer is cutting the corners, it doesn’t necessarily mean that you, as the borrower have to suffer.

I recently went to trial for one of our clients and sloppy paperwork became an issue for the bank. The borrowers took out their mortgage with “Bank A”. “Bank A” at some point in time attempted to sell or transfer the client’s note and mortgage to “Bank B”. “Bank B” was attempting to foreclose against our client. The problem is, “Bank A” wasn’t the entity transferring the note and mortgage to “Bank B”. Rather, “Company A”, a company owned by “Bank A” was attempting to transfer the note and mortgage to “Bank B”. This in of itself isn’t a problem, if it can be proven to the court that “Bank A” first gave the note and mortgage to “Company A”, and authorized them to transfer those documents to “Bank B”.

The concept of who has the right to foreclose against you is called standing, and one of the ways to prove to a court someone has standing is to connect the dots between the entity who loaned you the money and the entity who is trying to foreclose. Just because the plaintiff in a foreclosure says they “have the note” doesn’t always mean they are the right entity to foreclose against you. They need to prove to the court the history of how and to whom the note and mortgage was transferred.

The problem in this recent trial was a lack of sufficient evidence to prove how the note and mortgage was transferred from “Bank A” to “Company A”. Without that chain in the link, the transfer of the note and mortgage from “Bank A” to “Company A” to “Bank B” is incomplete. In this situation we say “Bank B” lacks standing to foreclose – meaning “Bank B” is not the proper entity to try and foreclose our client’s home. This defense was raised and we were able to successfully show the court that “Bank B” was not the proper entity to foreclose because they couldn’t prove the complete history of the note and mortgage. Without this crucial element, the court was forced to dismiss the case and rule in favor of our client.

How a note and mortgage is transferred between entities can sometimes be complicated to pinpoint. Proving the history of the note and mortgage is essential for the Plaintiff to prove their case, and expert legal help can assist in determining whether your note and mortgage were properly transferred. Make an appointment with Loan Lawyers today and let us assist you with developing strategies and defenses to keep you in your home.