New foreclosure defense: Prove I owe you

[Hilarious Clinton 452]

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.

http://www.msnbc.msn.com/id/29242063/?gt1-42003

[Trumplestiltskin 5,791]

I hear you can stall foreclosure for up to year by asking for original documentation. I've seen a few financial advisors on TV who have suggested doing that to play for time.

[LaL 418]

Hmm. Im not sure how I feel about this.

[Trumplestiltskin 5,791]

If the alternative is homelessness, bankruptcy, wage garnishment, and ruined credit - pretty much anything is fair I'd say.

Edited February 18, 2009 by Paul Daniels

[MrsCat 6]

I was at the State courthouse yesterday, and the entire docket was foreclosure proceedings. #1 name on the list was Countrywide. I guess they made very bad decisions about who to lend to.

Not sure how I feel about stalling foreclosure. I guess if they have to produce the original, than that's the way it is. But its not like any of these people will be able to unload their homes or bring them back into compliance with the bank. Its really just delaying in inevitable.

Although, stalling having a foreclosed home on the market, could help others who are trying to sell and get out. Less on the market, better chance yours will sell. But its not like that many people are buying right now.

[LaL 418]

In court yes, I can understand asking the other party to provide documentation to support their claim, however - *knowing* you owe a debt to a particular outfit and asking them to prove it because of a terrible life changing event (loss of job, etc.), idk.

[Trumplestiltskin 5,791]

From what I understand the idea is to draw out the negotiation period with the banks - so that the homeowner can get more money together to make a deal with the bank.

A lot of people are trapped in these mortgages and have little choice but to ride out the recession however they can. They can't sell because they get slapped with deficiency judgements on the lowered value of the house against the value of the initial loan, and foreclosing has obvious implications for the future. Either way you ruin your life financially for years to come.

If that's the only card to play - then all's fair I say. Its better than the alternatives.

[Caladan 19]

Hmm. Im not sure how I feel about this.

I think it's sensible. If someone's taking me to court saying "you owe X", surely I shouldn't just take their word for it, especially since loans can be sold.

[Jasman0717 9]

Obama is going to fix it

[rclouse 0]

This is a great tactic. I fail to understand why banks won't work with homeowners to keep them able to pay their mortgage. I mean, if you can't afford $2000/month but can afford $1500, isn't it better for the bank to get that rather than foreclose and then have to sell the house at a substantial loss?

[NickD 203]

Son got a loan from a local Anchor bank, sending off advanced payments to pay off a 15 year load in about 3-4 years, the automated system got all fouled up, so called the bank to find out why. Was told his mortgage was sold to another bank, was a bit shocked to find that out.

Doesn't make sense to me, our local banks get money from depositors and pay them interest, loan that money out at a much higher interest to make a profit. Son did get a guaranteed fixed rate rather low interest loan, would would want to buy that? Also has on his contract, no prepayment penalty, got his old man involved in that. So if he does pay it off quick, somebody is going to lose money on this deal, they will never get that interest back for whatever they paid for that loan.

Next time I talk to him, will ask him to ask his bank if they can produce his original mortgage contract, maybe he can even get a better deal.

I never knew banks were selling mortgages until all this bank collapse stuff occurred, still sounds stupid to me. Claim banks were issuing loans just to make a profit by selling them without checking credit history and stuff like that. The real idiots are the ones that purchased these, so why are we paying for it?

[Y's_habibitk 2]

If the alternative is homelessness, bankruptcy, wage garnishment, and ruined credit - pretty much anything is fair I'd say.

I can agree with this to a point.

But, if it's a case where they received a loan for a house they really couldnt afford, then the homeowner shares as much blame as the predatory lender. thats just MHO.

[spookyturtle 9,466]

This is a great tactic. I fail to understand why banks won't work with homeowners to keep them able to pay their mortgage. I mean, if you can't afford $2000/month but can afford $1500, isn't it better for the bank to get that rather than foreclose and then have to sell the house at a substantial loss?

That would make too much sense and solve the problem too easily, hence it isn't done. If I lent someone money with interest, and they were having problems paying me, I would be happy to get my original amount back instead of losing it all.

[Trumplestiltskin 5,791]

If the alternative is homelessness, bankruptcy, wage garnishment, and ruined credit - pretty much anything is fair I'd say.

I can agree with this to a point.

But, if it's a case where they received a loan for a house they really couldnt afford, then the homeowner shares as much blame as the predatory lender. thats just MHO.

I can't imagine that a person is going to sit back and say "yeah I deserve to be homeless"

[dalegg 143]

Then you've got the Ohio congresswoman who is actually telling her constituents to do this. Maybe this is where the woman got the idea

Marcy Kaptur

Edited February 19, 2009 by dalegg