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Show Me the Original Note and I Will Show You the Money

posted by O. Max Gardner III

As mortgage delinquencies rise each month, and as the number of foreclosures increase each quarter, the “new mantra” of many pro-se and represented consumers is to demand that the mortgage servicer “prove up the original note.” Is this just some new and creative gimmick that has been sold to the desperate homeowners and to a few lawyers who have attended “progressive” seminars or is there really something to it? I submit that there is really something to it.

In my last Credit Slips post, I wrote about what I call the “Alphabet Problem.” Succinctly stated, this problem arises out of the necessity for a true sale of the mortgage note and mortgage from the originator to the sponsor for the securitized trust; then from the sponsor to the depositor for the securitized trust; and finally from the depositor to the owner Trustee for the trust. These multiple “true sales” are necessary in order to make the original asset (the note and mortgage) bankruptcy-remote and FDIC-remote frin the originator in the event the originator files for bankruptcy or is taken over by the FDIC.

Under the securitization model, all of these “true sales” with supporting documentation must be confirmed and all of the documents must be held by the Master Document Custodian for the securitized trust. Finally, the ability of the rating agencies such as Fitch, S&P and Moody's to rate the bonds to be issued by the underwriter for the trust is based in part on confirming that there are unbroken chains of transfers and assignments of all notes and mortgages from the originators all the way to the trust; that a “true sale” occurred at each stop along the way; and that the Master Document Custodian has all of the “original documents.”

The source of the “Show Me the Original Note” arguments arises out of bankruptcy and foreclosure cases where the mortgage servicer failed to attach a copy of the duly negotiated original note to the Proof of Claim, the Motion for Relief from Stay, or the foreclosure complaint. In a growing number of these cases, bankruptcy judges have characterized these practices as gross recklessness, extraordinary incompetence, systemic abuse, providing evidence of more concern about increasing the time line completion rates of the local law firms than about the accuracy of the documents and papers filed with the courts.

In the recent case of Niles and Angela Taylor, 2009 WL 1885888 (Bankr. E.D. Pa. 2009), Judge Diane Weiss Sigmund described in great detail how the default mortgage servicing and foreclosure systems really work. The servicer in Taylor was HSBC Mortgage Corp; the out-source provider was Lender Processing Services, Inc., f/ka/ Fidelity National Information Services, Inc.; the national law firm was Moss Codilis LLP; and the local law firm Udren Law Office. 

The system described by Judge Sigmund starts with LPS, the largest out-source provider in the United States for mortgage default services, with offices in Minneapolis and Jacksonville. LPS maintains a “network” of national and “local” law firms, all of who sign contracts with LPS. Under these “Network Attorney Agreements,” the national and local firms have no authority to communicate directly with the mortgage servicer about any issues that may arise in any given case. Likewise, the servicers must execute a 51-page Default Service Agreement with LPS that delegates to LPS all functions with respect to the default servicing work. LPS, in turn, then uses a software communication system called “NewTrak” to deliver instructions and documents to the LPS network attorneys and to deliver any information to the servicers. LPS also has access to the servicers data-base platforms so that LPS can review loan histories, enter payments, apply payments, enter charges and fees, reverse charges, place funds in suspense accounts, etc. The purpose for this business model is to “manage without human interaction” the relationship between the Servicers and the LPS network attorneys. See In re Taylor, supra, at 1885889 to 1885891.

The dysfunctional nature of this system and the lack of any real attorney supervision are demonstrated by the way the Moss Codilis law firm prepared the Proof of Claim form in Taylor. Moss Codilis apparently has a Proof of Claim document production team for each servicer. Each team consists of 10 people that “set-up” the form, 10 people who process the claims and 3 people who are allegedly quality control personnel. None of these team members are lawyers or even paralegals. A claims processor would retrieve the mortgage default data directly from the servicers accounting system (with 70% of the Servicers, this would be MSP, which is owned and supported by LPS) and complete the Proof of Claim form. The signature of the “Compliance Director” or “Team Leader” is then electronically affixed to each Proof of Claim and then it is e-filed using the Pacer system. In Taylor, the LPS “Team Leader” testified that the she randomly sampled about 10% of the claims filed and that even though she was employed by LPS she signed the claims as an officer of the servicer pursuant to a "signing authority." The evidence in Taylor also established that the servicer, HSBC, did not “undertake to review the proof of claim either before it is filed by Moss or after although it could do so as the proof of claim is uploaded into the LPS NewTrak” communication system.

In Taylor, the amount of the alleged arrears and other payment data included in the Proof of Claim was simply not accurate.  Also, the “wrong note” was attached to the Proof of Claim. The Team Leader testified that one of the team processors should have “caught the payment error.” She then attributed the attachment of the wrong note to an e-filing error and explained that since no one reviewed the claims after they were e-filed there was no way this error could have been discovered (unless, of course, some one took the time to reviewed the filed claims).

The motion for relief from stay in Taylor was not filed by Moss Codilis but by the Udren Firm, which is noted as a local “Fidelity-LPS Network Firm.” According to the Network Agreement, the servicer is deemed to be the “mutual client” of both LPS and the local firm and LPS is designated as the agent for the servicer. Mr. Adrien, the senior partner of the local firm, testified that they delegated all of the LPS work to an administrative staff and that they relied solely on electronic data and had no paper files. The Udren firm employs 10 attorneys and 130 paralegals, processors and administrative personnel, including employees in the referral department that monitor NewTrak for LPS referrals.

The Taylor case confirmed that once a mortgage loan in bankruptcy becomes 60 days in default pursuant to the MSP system, a code is entered into MSP which automatically triggers a NewTrak communication to the designated local firm to file a Motion for Relief from the Automatic Stay. There is no human involvement in the designation or authorization of counsel for the task for which the referral is made nor is there any authority granted to counsel other than to perform the task for which the referral is made. The 60-day coding will also cause MSP to upload the mortgage payment data, including the note, mortgage and assignments (if any) and any other necessary documents for the filing, into NewTrak to be retrieved by local counsel.  NewTrak provides the local attorney with the precise information it is coded to produce to perform the given task. NewTrak also creates specific time lines for the performance of each task by local counsel, since such counsel is rated, paid and retained pursuant to their annual APR Ratings (Attorney Performance Ratings). The paralegal operation of the local firm will then prepare the motion and notice of hearing. The motion is they made available on the NewTrak screen for the designated bankruptcy attorney who then may or may not review the same. The electronic signature of the attorney is then affixed and the motion and notice are then filed ECF by the paralegal. None of these pleadings and exhibits are ever reviewed by any employee of the servicer before they are filed with the court. The Taylor court characterized these motions as “canned pleadings prepared by a paralegal from NewTrakl screens.”

The Motion for Relief from Stay filed in Taylor included numerous errors including misapplication of payments, charges that had not been approved by the Court, and funds held in suspense (money received by the servicer but not yet applied to any account associated with the loan). None of these facts were apparent from the Motion and no one with the local firm could explain any of these matters or how they might impact the right to relief from stay or the status of the debtors’ outstanding payment obligations.

It seems obvious that the LPS “Network System” is not organized to assure accuracy and accountability. A study performed in 2007 by Credit Slips own Professor Katie Porter and funded by the National Conference of Bankruptcy Judges found that in 70 percent of the cases studied mortgage servicers claimed homeowners owed an average of $6,309.00 more on their loans that the homeowners believed was owed.  Professor Porter also testified before the Congress earlier this year that servicers commonly foreclosure when they do not have the legal right to do so, impose unwarranted or illegal fees or charges to the loan, and miscalculate how much families owe. 

Judge Elizabeth Magner, in McCain v Ocwen, ______________, stated that the evidence adduced in multiple cases involving Ocwen showed that the servicer regularly acted in “bad faith” and engaged in a “systematic abuse” of the bankruptcy process by charging improper fee and attempting to collect bankruptcy-related fees without court approval and after many of the cases had been closed upon the debtor’s successful completion of their Chapter 13 plans.

We could go on and on with example after example of similar systematic abuses by almost every mortgage servicer but the extraordinary incompetence and recklessness of the mortgage servicers and their out-source providers speak for themselves. After reviewing Taylor, including all 62 of the detailed footnotes, there is nothing more one can say about the system other than the final comments by Judge Sigmund:

“When an attorney appears in a matter, it is assumed he or she brings not only substantive knowledge of the law but judgment. The competition for business cannot be an impediment to the use of these capabilities. The attorney, as opposed to the processor, knows when a contest does not fit the cookie cutter forms employed by the paralegals. At that juncture, the use of technology and automated queries must yield to hand-carried justice. The client must be advised, questioned and consulted. The thoughtless mechanical employment of computer-driven models and communications to inexpensively traverse the path to foreclosure offends the integrity of our American bankruptcy system. It is for those involved in the process to step back and assess how they can fulfill their professional obligations and responsibly reap the benefits of technology. Noting less should be tolerated.” 

And, this finally gets us back to the “Show Me the Original Note” argument. When you have a system that is devoid of any meaningful review by trained and competent lawyers; when you have a system where the documents are prepared by an automated software program with no review at all by a trained attorney or incredibly by the actual moving party; when you have teams of non-lawyers and non-paralegals preparing documents in a “production line operation” who are only graded on how many motions they “produce” per hour; when you have no one reviewing the attached mortgage note or mortgage or any assignments; well, when you have all this, then it is very easy to understand why so many motions for relief from stay and complaints in foreclosure are filed with a mortgage note that appears to have no legal or factual relation to the moving party and in some cases to the consumer debtors. Hence, the etiology of the “show me the original note” defense. The creditors own mass-production automated systems of “out of mind and out of sight” computer generated forms gave rise to this new defense.

However, the hodgepodge of motions for relief with improper notes cannot be blamed entirely on the need for speed and the use of automated document producing programs. In many cases, especially those where the mortgage was originated between 2005 and 2007, the originators were so busy that in lieu of transferring the notes and documents “up the line in an unbroken chain” they just keep the originals and transferred the “data” electronically. In short, there were no true sales and negotiations of the original notes and no true assignments of the mortgages and deeds of trust. As a result, when a court demands that the Trustee for a residential mortgage backed securitized trust produce the original note duly negotiated in an unbroken chain they simply cannot do it. They just do not have the hard copy documents.  All they have is data and information in a computer file.

This incompetence of the non-paralegals in the local law firms on the one hand and the desire of the mortgage originators to cut-corners and save paper on the other hand form the basis for what I call the “Alphabet Problem” that was the subject of an earlier Credit Slips post. Let me provide an example from a real SEC securitized trust filing. Between January 1 of 2006 and February 1 of 2006, Argent Mortgage Company LLC originated thousands of residential mortgage loans to be securitized. Exactly 7,767 of those mortgage notes were eventually securitized in a residential mortgage backed trust named “Argent Securities Inc., Asset-Backed Pass-Through Certificates, Series 2006-W2.”  The closing date for all of the notes and mortgages to be delivered to this Trust was February 27, 2006. According to the Prospectus Form 424B5 filed with the SEC, Argent Mortgage Company, LLC, sold the notes and assigned the mortgages to Ameriquest Mortgage Company as the Sponsor; Ameriquest then sold the notes and assigned the mortgages to Argent Securities, Inc, as the Depositor; and Argent Securities, Inc., them sold the notes and assigned the mortgages to Argent Securities Trust,  Asset-Backed Pass-Through Certificates, Series 2006-W2.

In this example, the A to B transfers were from Argent Mortgage to Ameriquest Mortgage Company; the B to C transfers were from Ameriquest to Argent Securities; and the C to D transfers were from Argent Securities to Argent Securities Trust, Asset-Backed Pass-Through Certificates, Secires 2006-W2. And, according to the Prospectus, ALL of these transfers were finalized before the closing date of February 27, 2006.

Given this complex and detailed securitization structure, what happens when LPS sends a NewTrak assignment to a local firm to file a motion for relief from stay for Argent Securities Trust Asset-Backed Pass-Through Certificates, Series 2006-W2, and the system attaches as an exhibit the original note and mortgage that names Argent Mortgage Company LLC as the beneficiary? If the court or the debtor raises an issue about “standing” or “failure to prosecute the motion in the name of the real party in interest,” what normally happens? First, remember that the local firm under the LPS Network Agreement cannot communicate with the servicer or trust, who is the movant in the case. The local firm can only send a NewTrak “issue” to LPS.  LPS has what it calls “document execution teams” for every LPS “Servicer Partner.” These teams do not include lawyers or trained paralegals but rather include individuals who have been trained to produce documents. So, what do they do to resolve the issue about the Argent Mortgage Company note and mortgage? Well, they will do the one thing that ensures maximum speed and efficiency and meets the attorney APR time lines. They prepare and sign as a Vice President of Argent an endorsement of the Argent Mortgage Note from Argent directly to Argent Securities Trust, Asset-Backed Pass-Through Certificates, Seris 2006-W2 and date it August 11, 2009. They prepare and sign as a Vice President of Argent an assignment of the mortgage from Argent Mortgage Company to the same Trust  and date it August 11, 2009, with an effective date of February 27, 2006.

What is wrong with these LPS created documents? First, they are what I call A to D transfers and assignments. Such transfers could not have occurred after the “closing date” for the named trust. Argent Mortgage Company had no note to transfer to the Trust in 2009, having sold the same back in February of 2006. Second, the A to D transfers ignore two of the most important entities in the securitization process—the Sponsor, Ameriquest Mortgage Company, and the Depositor, Argent Securities, Inc. Third, such transfers are totally inconsistent with the mandatory conveyancing Rules established by Section 2.01 of the Pooling and Servicing Agreement. Fourth, such transfers are totally inconsistent with the representations and warranties filed by the Master Document Custodian for the Trust with the SEC, the Owner Trustee, and the Rating Agencies. Fifth, such documents are inconsistent with the Real Estate Mortgage Investment Conduit Rules promulgated by the Internal Revenue Service for this type of trust. And, finally, from the point of view of the Chapter 13 debtor, these transfers and similar variations of the same raise serious issues about whether or not the Trust was really and truly a secured creditor on the petition date. If these A to D documents were filed in connection with a contested Motion for Relief from Stay, then one could infer that the Trust did not in fact hold and own the mortgage note on the petition date.

Another example of a similar but different problem occurs when you have an A to D transfer to try to prove up standing in a judicial foreclosure case and the debtor then files for Chapter 13 relief within 90 days of the date of the document. Under these facts, do we have an avoidable preference to the Trust under Section 547? Also, in the motion for relief from stay context does the A to D transfer post-petition expose the servicer, the trust and the originator to automatic stay liability under Sections 362(a)(4) and (a)(5)?  These Sections prohibit “any act to create, perfect or enforce any lien against property of the estate” and “any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secured a claim that arose before the commencement of the case.”  It would seem to be basic “Hornbook” law that the Trust would have to own and hold the note to “enforce” the mortgage.  As a result, if the Trust did not actually acquire the note until after the case was filed it would appear to be a clear violation of these sections.

In closing, I would not want the servicer to just “Show Me the Original Note.” I would want the servicer to show me that the original note had been duly and timely negotiated from A to B, B to C and C to D, with D being the securitized trust. I would want proof of an unbroken chain of such negotiations between all of parties. I would want to see the same timely assignments of the mortgage or the deed of trust. Consequently, the defense should not be limited to “Show Me the Original Note” but should be expanded to show me that the “Original Note” was duly transferred and negotiated between all of the parties involved in the deal and was in the possession of the Master Document Custodian for the Trust BEFORE the closing date for the due transfer and delivery of such documents. Thus, there is much more to this than a simple request to produce the Original Note. Given how hard it has been for servicer to comply with such a seemingly simple request, how they comply with this expanded version of the question will be a real test. Stay tuned.


I understand that what has happened is not what was supposed to have happened, i.e. the parties did not follow the rules that they created and agreed to. But does it matter in terms of the foreclosure proceeding itself? Who is entitled to enforce the note and mortgage? Does not the answer reside in the UCC?

Under Ohio law, the mortgage follows the note, whether there has been an assignment of the mortgage or not. Transfer of the note effectively transfers the right to enforce the mortgage. Thus, the real question is "who can enforce the note?" Under the UCC, Any of a number of persons can do so. Under UCC 3-301, a person entitled to enforce the note include: (1) a holder, (2) a non-holder with the rights of a holder, (3) a person claiming to be entitled to enforce a lost or stolen note. A person entitled to enforce the note need not be the owner of the instrument, and may even be someone in wrongful possession of the note.

In other words, is a mortgagor permitted to argue the niceties of the underlying legal framework in order to defeat an otherwise valid foreclosure claim (assuming there is a default, etc.).

Also, are not you really arguing the difference between legal and beneficial title? I understand attacking the A-D negotiation/assignment. At the time of the A-D transfer, A had no beneficial title to transfer because such was transferred earlier under the other labyrinthine mechanisms you describe in the Alphabet Problem. However, if legal title had not transferred, i.e. through negotiation, why is the A-D transfer improper?

I love your analysis, but don't that it helps the practitioner in the trenches.

It is far worse than you imagine. The chain of title stretches so far as to be beyond comprehension. I will gladly forward a PDF file of the decision of Judge C. Boyko regarding Carol Moore, a woman with a $76k mortgage that was sold off 660 times in less than one year. Produce the note is an honest attempt by homeowners, but it is running into the reality of bankings influence over the judiciary. Plain and simple, you just can't expect to fight the banks in court and win.
If you would like a copy of the PDF, just email me.
Sinclair Noe
[email protected]

So .... in re: Carol Moore?

aaahhhh where you see weakness (individual attorneys dealing with confirmation of all things on top of Adv. Lit.) I see opportunity. Face it, Consumer Litigation attorneys are and probably will be in demand. You could keep you self super busy with a medium to high volume consumer bk firm. Honestly, with the volume out there. It's the only logical progression when you can't change policy. It feels hopeless though when everything gets so crazy. Facing discovery, admissions, on top of interviewing, Confirming, objecting to, noticing, 341s, (talking on the freggin phone) 523ees, 707bees yada yada yada... the last thing you need is having to fish though a mountain of discovery and answering pointless 12b6s. rant ova..

Isn't that the same Judge Boyko who gave Deutsche Bank all that trouble on foreclosures? Actually, on this very subject? They said something like the Judge just didn't understand how it worked.. about the above mentioned that is...ownership?

Mr. Max Gardner,

This and your other newest post are spot on for what is happening. I've been trying to get help regarding a case similar as this. Have been trying to tell people for some time that this is what's happening.

My problem comes from the fact I always thought if you put something into the court record it's suppose to be true. The only way an atty can verify this is if they do what they were suppose to do to begin with. Operate with documents in hand. If the original documentation isn't provided in the homeowners behalf how can we verify that whose supposed to of paid taxes has actually paid them?

In my own case I'd like to know if a company hasn't properly endorsed the promissory note with a date how is it valid? To me even though a proof of claim is filed the real one needs to be proven as well. Citi on my deal put down 10 differnt company names under their umbrella. I only have one mrtge. I doubt they can show that each company owns a piece of my mortgage. To me this means they didn't show any original paperwork to validate any debt. Which means they have to go...

Great writing! It puts it into terms more will have a chance in understanding such a difficult issue for most to understand. The explaining with the master custodian was helpful as well.

You would be correct Patches re: Judge Boyko. If I remember correctly, the Boyko, Rose, O'Malley decisions collectively accounted for somewhere in the vicinity of 150 dismissals of FC actions. That was pretty much the turning point. And, almost simultaneously it seems, we started hearing about Judge Schack's decisions along similar and even more probing lines in NY as well. Little things... Like how employees of Fidelity National Information Services (and, subsequently, LPS) could work for both FNIS and other servicers/lenders simultaneously. MERS operates like that as well.

Take Bill Koch, for instance. He's an employee of Select Portfolio Servicing - but he's also an Assistant Secretary of MERS.
Funny how MERS, Encore Credit ( a CA corp.), the Bank of NY and Fairbanks/Select Portfolio Servicing all work out of 3815 SW Temple SLC, UT ... Come to think of it, it's also interesting that a Mississippi assignment was requested recorded by Fairbanks/SPS in SLC UT, "prepared" by a Jeff Prose of The Richmond Monroe Group in Branson, MO, involving Encore in CA, MERS in VA and an SLC, UT notary. Especially since C-wide was the servicer on the ECC Trust 2005-2 Trust. Sorry... "Zoot skipped a groove again"...

Boyko info:


Where it really gets fun is when the original note is sold, the terms and conditions of the note are unilaterally modified. In most tranches there are conditions that detail whether an underlying loan can be modified and what is considered a default. Those stipulations were not part of the original mortgage contract, but they now have an enormous impact, particularly with regard to possible modification. Only buy producing the original note can it be determined if unilateral alterations to the contract exist.
Of course, this is like trying to make apples out of apple sauce. The reality is that most judges, attorneys, and plaintiffs do not have the appetite or resources or patience for the forensic research.


I know unequivocally that New Century Mortgage (among others) DESTROYED original notes in the interests of saving money on shipping costs. Marketing groups of loans via electronic images burned onto DVDs saved them hundres of thousands in shipping costs. The system was implemented late 2004/early 2005 to much fanfare. Originals were scanned, called back for legibility and completeness and then destroyed. It was duplicated by other lenders quickly. What is your opinion as to the legal impact of this practice vis-a-vis claimants as HIDC of Notes that have not had a physical existence since the first few days of the loan's creation? If you'd like to obtain the name of the individual who oversaw the New Century product please let me know. I used to work for him during my days in the financial services industry. This process also permitted lenders to use PhotoShop or similar to "fix" documents borrowers never actually signed.

Walter Hackett


Since the Electronic Transfer of Documents Act specifically excludes Article 3 of the UCC, the practice you have described creates a major problem for the industry with respect to the negotiation of the notes to the Trusts. I hope the bond holders in these deals have hedged their bets with plenty of default swaps with the Treausry, I mean AIG.

Does this also create an issue for an investor in the Trust? Purchase of an asset backed note when there was no asset backing the note as it was not transferred. Can the investor also sue the originators/sponsors?

Kathy and Walter,

Kathy, my assignment also has Bill Koch, Kimberly Clark, and Jeff Prose. It is dated three days after yours. I'm in Florida. I requested Ms. Clark's application for notary public. Guess what? Bill Koch is one of the witnesses. In my case, it's Homefield Financial, SPS, MERS, and U.S. Bank all sharing office space. As Judge Schack stated (and I'm parapharasing) it must be one huge building.

Walter, I did some research on UETA. Section 16 deals specifically with Transferable Records. The definition of a transferable record is limited in two ways -- (1) only the equivalent of paper promissory notes and paper documents of title can be created as transferable record, and (2) the issuer of the electronic record must expressly agree that the electronic record is to be considered a transferable record. I believe (2) is the key because conversion of a paper note issued as such would not be possible because the issuer would not be the issuer, in such a case, of the electronic record. In other words, a converted promissory note is not a transferable record because the issuer did not give express permission for the promissory to be considered an electronic record.

I wonder if anyone has used this as a defense? MERS advertises its E-Registry and states that it holds the notes in electronic form for faster transfer and funding. As far as I'm aware, there are not too many electronic closings performed as of yet.

I would like the citation for the McCain v OCWEN Matter. This is good info! I hope that I am doing it right! THanks for the info.

I am suing Ocwen right now, lost in district court as I tried to allege they walked in the shoes of New Century who originate the loan and fraudulently transferred it one day prior to filing chapter 11. I am alleging that Ocwen is NOT the holder of my note.

Alina, keep digging on Bill Koch. His name shows up FREQUENTLY as both a Select Portfolio employee AND an asst. sec'y for MERS. You might try digging around in the Miami-Dade county registry http://www2.miami-dadeclerk.com/public-records/Search.aspx for more docs that show this. I believe that the Port St Lucie registry also has several. I'm sure that you'll be able to find plenty in registries that allow the viewing of actual docs.

This is looking more and more similar to the Laura Hescott and Scott Anderson issues that Judge Shack addressed. More discussion on Hescott and Anderson can be found over on the Home Equity Theft blog http://homeequitytheft.blogspot.com


You are absolutely correct when you say his name shows up in a lot of places. I have 48 assignments signed by him and not all are in Florida. I have some from a couple of other states as well. I found more but did not download them as I only needed some assignments that were right around the date of my assignment. The man is busy. I have 2 where on the same day he signed as Docket Control Officer for SPS and also signed as Assistant Secretary of MERS. I found his LinkedIn account as well where he states he is Docket Control Manager at SPS.

Double check your terminology, Alina. You may be swapping "docket" for "document" control officer. Feel free to drop me a line directly if you'd like to chat about this further... fcstory at getdshirtz dot com


oops, you're right. I have been working too much overtime on an upcoming hearing, so "docket" was on my mind. It should have been "document."


The "who can enforce the Note v. who can enforce the Mortgage" can get confusing. Keep in mind, enforcing the Note is one thing. Enforcing the mortgage is another. While the UCC allows a mere holder to enforce the Note, that does not mean that person/entity can enforce the mortgage (deed of trust in VA where I practice).

The mortgage is a contract between the homeowner and the lender. The mortgage determines who has the authority to do what - invoke the power of sale, accelerate the loan, remove/appoint substitute trustees, etc.

The easiest way to exploit the securitization process is to attack the authority of a purported owner of the Note to enforce the terms of the mortgage.

In VA, MD and DC the mortgage/deed of trust is clear - the "lender" (or presumably a successor in interest to the lender) may invoke the power of sale and remove/appoint substitute trustees. Yet, every time I review a deed of substitute trustee its executed by MERS, or MERS as nominee for Aurora, or Aurora as attorney in fact for Deutsche Bank as trustee for X loan trust, and sometimes, when I'm lucky, its the substitute trustee signing as "the person so designated by Wells Fargo to have said authority", and Wells Fargo is there "pursuant to an authorized pooling and servicing agreement" on behalf of US Bank, as trustee for Y loan trust.

Hope this helps.


I stumbled upon this blog a bit late...but it is very interesting to me because we asked the latest bank claiming ownership of our mortgage to produce the note or we would stop paying them. We did stop paying the mortgage and they have still not responded to several letters asking them to produce the note. We decided to ask them to produce the note after they attempted to alter our mortgage and tack on fees arbitrarily. The only response we have gotten from the current bank claiming to be the holder of the mortgage is to send us paperwork on how to renegotiate our mortgage. Or as we look at it...actually negotiate one with them since they don't have the note. Can anyone give us more insight on how others have proceeded with this in the state of TX?

That's very interesting Laura. I've been reading this and other info regarding "produce the note" and I wonder what would happen if anyone did exactly what you did?

I guess my question would be is, if they can't "produce the note", what rights does the bank or holder have at any point?

NY Times columnist Gretchen Morgenson published an article on Oct. 24, 2009, on a ruling by the bankruptcy court for the Southern District of New York (Judge Robert Drain).

"Ruling that a lender, PHH Mortgage, hadn’t proved its claim to a delinquent borrower’s home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. That’s right: the mortgage debt disappeared, via a court order." There was inadequate documentation to show that PHH Mortgage was the servicer of the loan or that U.S. Bank was the holder of the note as trustee of the securitization pool.

This very same issue came up on a recent episode of Bill Moyers Journal (TV program). Here is the discussion between Moyers and Ohio Congresswoman Kaptur:

BILL MOYERS: You did a remarkable thing on the floor of the House recently. And I want to show my audience a clip of a speech in which you urge people to break the law.

MARCY KAPTUR: So why should any American citizen be kicked out of their homes in this cold weather? In Ohio it is going to be 10 or 20 below zero. Don't leave your home. Because you know what? When those companies say they have your mortgage, unless you have a lawyer that can put his or her finger on that mortgage, you don't have that mortgage, and you are going to find they can't find the paper up there on Wall Street. So I say to the American people, you be squatters in your own homes. Don't you leave.

I am not a bankruptcy attorney but am interested in bankruptcy matters.

I am not a bankruptcy attorney either, but I spent decades as a corporate tax attorney. Corporations issued mortgage backed securities long ago--using an Indenture. The corporation issued a note in favor of a trustee and if it were to be assigned, then there was a written assignment of note. There are a number of reasons why ownership of a promissory note is a critical element of foreclosure. An unverified photocopy obtained from an unknown source is not the note--nor is it proof of anything except that somebody had access to a copy machine. A "created" assignment of moertgage is invalid in the abscence of the note--the note establishes the debt, the mortgage is merely a device to collect the payment of the note. The note may imply the mortgage --but not the reverse. The collection agencies by whatever name ----call them servicers, psuedo-law firms or document creators----seek to set aside the law of mortgages and the UCC by intimidating mortgagors. Now if I were to pay every person that that could manage to get access to the original note --or even a copy thereof, so long as I could get a collection agency to "create" an assignment of mortgage" no doubt I'd have abundant opportunity to make as many payments as there were gutsy thieves. Madoff and many others have proven that there is no shortage of these.So if I pay the first guy that comes along with forged documents a willing attorneys--what do I do when the party shows up with the blue ink copy that I signed? Will he walk away and say--gee I guess I was just too late. Not likely. Assume I was foreclosed upon by the frauder, my house sold, the proceeds paid over to the gutsy frauder, and a deficiency judgment entered against me. Now the real holder shows up with blue ink in hand---my house and the proceeds are gone--the thief in bankruptcy and unavailable for comment in a far away jurisdiction. The holder goes to the same court that entered the judgment and "proves", yes "proves" he has the blue ink. Now what? Who is the fool? Is payment to a frauder a defense in Ohio? Not today. Now lets try another tack--lets say the promissory note was obtained by fraud. Lets say the originating lender wanted to defraud the derivative security buyers in order to get fees and skim the proceeds of the sale ----that couldn"t happen you say--SEC watching you say, ask Madoff's victims about SEC! Well anyway so the lender offers an illusory teaser rate, gins up an appraisal at an affiliate, then provides alters the preliminary disclosure rates and costs by say 30%--etc. etc.---anything to get the homeowner to sign so the lender can sell the derivatives. Now the lender doesnt want anybody--especially outside auditors or ratings guys to see that dirty note--so it disappears along with the facially fraudulent terms. No problem right --debt still recorded electronically right? But now the predatory lender knows he may face trouble collecting--not a holder in due course right. So why not create a wholly owned special purpose Delaware Trust to APPEAR as an independent unknowing holder for the benefit of the other group of defrauded suckers the security purchasers. It works, even the bankruptcy lawyers get confused by the impression that the accounting treatment allows this frauder to issue public debt as if it were a "sale". Hey guys wake up--you dont "sell" debt--you issue it! The trusts are a mere instrumentality used to get off balance sheet debt that allows the appearance of a well-capitalized lender. For tax purposes the transfers to the trust retain the benefits and burdens of ownership to the lender group. And if the accounting profession hadnt prostituted itself to facilitate this Enronesque behavior, the debt owed to the derivative securities owners would be there as would the homeowners' promissory notes --as assets-notes receivable. The way it is all portrayed the non-descript trust is owner--despite the retained benefits and burdes and dominion and control. You guys out there defending need to go back and review what ownership means. The lender owns the promissory notes and owes the security holders--or somebody does. The ownersip of notes and liabilities cannot be in a disembodied form--there is a person that owns the residual powers--usually the servicer. But back to the point--the lender predator cannot collect on the fraudulently procured note, any more than Jesse James can order a person to sign a check at gunpoint--then turn it over to Brother Frank who was holding the reins--and the two collect on it. So why is it important that the real owner of the promissory note prove it? Folks wake up and remember your law school and the Madoff affair.

I have over 100 cases is suit in ri. Help would be great

What happens if I pay off my mortgage, but the bank or servicer, does not have the original note?

We are dealing with GMAC now on a short sale issue. They refused to work with us on a rental property citing that we'd never missed a payment therefore, we didn't warrant any assistant. Renters notified us in Aug. they were moving, house went on the market (in Virginia) and within two weeks (2nd week in Sept.) we had an offer and a settlement date of Nov. 30th. Five weeks after the offer was received, the GMAC negotiator requested that the Buyer make her "best and final offer". She came up with another 10K. No communication whatsoever after that. On Nov. 30th (the settlement date) the Buyer notified us she was withdrawing her contract due to the extended time with no end in sight and on that same day the 1st investor gave their approval. One week later the 2nd investor said they wanted more money. Our mortgages were with GMAC - all payments with to GMAC and all correspondence went to GMAC. The "Investors" were never mentioned yet they were the sole reason the short sale did not go through. It seems as though they intentionally sabotaged this deal and our credit in the process. Now that we have missed (now three) payments they are planning to foreclose. House is still for sale but no new contracts on the horizon. Do we have any recourse? We were not informed that our loan was own by private investors. And... when asked who they were GMAC said they could not tell us that information. They sat on the completed package for 2 1/2 months and it appears they knowingly let the settlement date pass. Our options now?

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