Foreclosure Defense: Does a Loan Company Have to Produce the Note
FAQ’S
The following is general legal information only and is not intended to be construed as legal advice or a substitute for obtaining legal advice
(We will be adding to this section – if you have a question about Produce the Note, please email us at steve@vondranlaw.com)
1. If the lender cannot produce an original copy of the note, does that mean I get to keep my house for free?
Not necessarily. If the lender is asked to produce the note, and they refuse to do so, this is something that you may be able to raise in either; (a) filing for a temporary restraining order (TRO) or preliminary injunction (one way to try this is arguing non-compliance with California foreclosure statutes 2923.5-2924 as false declarations are being made on the notice of defaults), (b) filing a bankruptcy and defending an action to lift the stay, (c) treating the debt as unsecured in bankruptcy and making the lender prove its standing as a secured creditor (as opposed to unsecured creditor), or (d) it may be raised in an unlawful detainer (eviction) action where you demand the evicting party has the legal right to foreclose and evict you. These are just a few ideas that lawyers and litigants are attempting to advance. We cannot make any predictions, or provide any information, regarding the success or failure rates of these theories. Contacting a lawyer to discuss your situation and the pros and cons of these theories is highly suggested)
2. Does California Foreclosure law require that the lender produce the note in order to foreclose?
Not really. California Foreclosure Statutes are found in California Civil Code Section 2923.5-2924 and require, among other things, that the “beneficiary or their authorized agent” contact the borrower to assess their financial condition and discuss loan modifications BEFORE filing a Notice of Default and attempting to foreclose. This means, at least in my opinion, that the TRUE, REAL AND ACTUAL BENEFICIARY must be identified in order to ensure compliance with this section of the foreclosure law. This is a basic cornerstone of foreclosure defense (i.e that the foreclosure statutes in California and Arizona are followed). Only the “beneficiary or their authorized agent” is permitted to make the 2923.5 declaration in the notice of default, which assumes there is actually a beneficiary (i.e. the person entitled to collect the debt as evidenced by the Note). If you look at your promissory note and deed of trust, you will normally find reference to the words “note holder” which shows that the parties contemplated, at the time of signing the loan documents, that there would be a note holder that would be entititled to enforce the debt. If challenged in a Court of Law, we believe the Court should look at the chain of title and determine who is the beneficial owner of the loan, and if there are any conflicts with that recorded owner, and the beneficiary named in the notice of default, it would seem fair for the Court to demand that the note be produced to see who the actual beneficiary is, and thereafter determine whether the “beneficiary or their authorized agent” complied with the Notice of Default Contact and Declaration Requirements. If not, the lender should be forced to produce the note or else re-do the foreclosure process. Again, this is merely a theory we are working with and success or failure cannot be predicted.
4. Should I represent myself and demand that the lender produce an original copy of the note?
You need to evaluate this. The legal theories presented herein are complex and not easy to articulate. If you have no means to pay for an attorney, then you really don’t have any options. Where you have the finances to hire an attorney to investigate potential claims that may exist under the produce the note theory, that should be considered as the preferred route given the nature and complexity of the issues. Note that most foreclosure defense attorneys will not be able to take these types of cases on a contingency fee basis since there may not be significant damages that could be recovered, like, for example, in a personal injury case.
5. Does the lender have any defenses if they cannot produce the note?
Yes. The lender may wish to offer evidence that the note was lost or destroyed. This proof may come in the form of a “lost note affidavit.” Other defenses may also exist.
6. What happened to all the notes that mysteriously cannot be produced?
Research suggests that perhaps as many as 40% of the notes were intentionally destroyed during the securitization of loans process. The basic idea is that if your loan is pooled into mortgage pools with hundreds or thousands of other loans, and then these pools are bought and sold on a frequent basis by wall street investors, (and often the loan pools are insured in the event of default) then having actual possession of the note does not become the most important issue to the lenders. Instead, they may have been willing to gamble on the fact that very few people are willing to challenge the default of their loan or production of the note through a foreclosure defense attorney (many people just move out and allow themselves to be foreclosed on when they cannot make loan or mortgage payments). Since there is such an influx of foreclosures today, and given the power of the internet to share foreclosure defense theories such as produce the note, and given that the lender likely did not predict a foreclosure crises of this magnitude, we have a new age of foreclosure defense and legal theories that may be novel in nature, but which appear to have legal merit, at least based upon existing commercial law and debt collection standards. What do you think a CEO of a major bank would say if you mailed them a collection letter claiming they owed you $250,000? Don’t you think they would hire an attorney and demand that you prove the debt is actually owed? The problem is, the banks do not want you challenging them and the system of securitized loans that they have created.
7. Is there anywhere I can go to get more information on the Produce the Note foreclosure defense strategy?
Yes. Much of what I learned on mortgage back securities and the produce the note foreclosure defense strategy was learned at Neil Garfield’s seminar (which the California State Bar permitted lawyer continuing education units to attend) and through his website at http://www.livinglies.wordpress.com/ . He also has a section called “lawyers who get it” which may provide some foreclosure defense attorneys and law firms you may want to call in your area to see if you have a litigation case.
(We will be adding to this section – if you have a question about Produce the Note, please email us at steve@vondranlaw.com)