Mortgage tips: Avoiding foreclosure

Wed, Jun 9, 2010

Financial Advice, Financial News

The foreclosure epidemic in America is ongoing, and many desperate homeowners are seeking any tactic possible to stave off losing their home. Arising from this backdrop is the “produce the note” movement. This is a strategy propagated by many lawyers and foreclosure defense specialists, and it entails demanding that your lender produce the actual note evidencing your mortgage loan. One would think that this would be a fruitless strategy seeing that large and highly efficient banks easily can print a copy of your mortgage loan. However, this is far from the case.

A main reason behind the current mortgage crisis is the complex way mortgages were sliced and diced after they were written. Banks who funded mortgage loans then quickly flipped them — often into convoluted CDO and CLO instruments characterized by thousand page transaction documents. The result of this often was that it became nearly indecipherable when it came to ascertaining which entity actually owned a particular loan after it was sold. Consequently, in many instances when a bank is forced to show evidence of the current status of the loan they are unable to.

Without being able to “produce the note” and subsequent chain of title, the bank can’t proceed with the foreclosure. There is a story of one man in Florida who has shown up in court 12 times to defend the foreclosure action against his home, and each time the bank could not produce note documentation to the judge’s satisfaction. This man is still living in his home even though he has not paid his mortgage in almost 3 years. The ethics of this strategy is debatable, but when it comes to preventing your family from being thrown out on the street the luxury of philosophical analysis of morality often takes a back seat to hard realities.

, , , , , , , , , , , , , , , , , , , , , ,

Leave a Reply

CommentLuv badge