I read an Associated Press report out of Florida that says some homeowners facing foreclosure are using a tactic called "Produce-The-Note."
The homeowner demands that the lien holder produce the ORIGINAL MORTGAGE NOTE signed by the homeowner.
Since mortgages are often bundled and sold numerous times to investors, that original note may be lost or destroyed. The tactic supposedly would delay the foreclosure and buy a homeowner more time to stay in the house and negotiate a payment plan with the lien holder.
Two drawbacks to trying this tactic:
* You must seek a ruling from a judge on the request. That means legal fees. EXPENSIVE legal fees.
* More often than not, there is an ELECTRONIC COPY of your original note. You go to court, the lien holder's lawyer pulls that copy up on a computer screen...BAM! Not only do you lose your house, but you're also out a ton of legal fees.
Sam Goff, loan officer and director of marketing for Evolve Mortgage in Cordova, TN, told me in an e-mail, "...the current holder may not even have an electronic copy. The borrower is well within their right to demand proof that the holder has a legal right to foreclose. Certainly, one would think that the courts would agree with a homeowner that, if the lender could not produce this proof of indebtedness, they could not foreclose."
Bryan Smith, an attorney with Pietrangelo Cook Attorneys & Counselors in Memphis, says he has examined titles and foreclosed on properties where it was difficult to find the original note.
"Often times a problem can arise where a loan is in default and the file has been referred to a lawyer for foreclosure, but prior to the sale, the debt is transferred," Smith said in an e-mail. "This can often result in title from the foreclosure being vested in the incorrect name following the sale."
That would make it difficult to produce the original note, but eventually, the lender and the courts will catch up with the homeowner. It may buy time, but it's putting off the inevitable: you can't stay in the home if you can't pay the note.