How to Find the Owner of Your Mortgage

Concerns continue about parties filing foreclosures when they do not own the note. Florida recently enacted a rules requiring plaintiffs in foreclosure to verify ownership of the note. (Here's a brief article on the rules, with the original subheading "Bankers Don't Like It"). While these concerns may be interesting for those of us who understand civil procedure, standing, and the importance of the rule of law, the practical problem looms for homeowners who want to know who owns their note. Particularly, in non-judicial foreclosure states or for those families who are not in foreclosure, they do not have the option to ask the judge to order the plaintiff (foreclosing lender) to prove ownership.

John Rao, an attorney at the National Consumer Law Center and Credit Slips guest blogger, wrote a great short piece in the National Association of Bankruptcy Trustees publication this winter called "Six Ways to Find Out Who Owns and Services the Mortgage." I can't seem to find an online version, so I'll give the short story here. For ownership (rather than servicing), the best options that John identifies are:

1) Send a request to the servicer asking it to tell you (the borrower) who the actual holder of the mortgage is, and to provide the address and telephone number of the owner of the obligation. These requests are authorized by Truth in Lending section 1641(f)(2). Importantly, the Helping Families Save Their Homes act of 2009 amended the Truth in Lending Act to provide a remedy for non-compliance. Borrowers can recover actual damages, statutory damages, costs and fees.

2) Review the transfer of ownership notices that are required to be sent as of May 20, 2009 and thereafter under the Helping Families Save Their Homes Act. This one won't help for loans bought and sold long ago, but at least Congress heard the message that tracking down ownership is a problem.

3) Send a "qualified written request" under the Real Estate Servicing Procedures Act (RESPA). While this statute primarily is aimed at servicers, John Rao points out that because the servicer acts as an agent for the owner of the mortgage, the request is related to the servicing. The servicer has 60 business days to comply, which may be too long for families facing foreclosure. Actual damages, costs and attorneys fees are available for violation. HUD provides a little information on how to make a qualified written request on its website.

It's important to note what is NOT on this list: the old-fashioned method of searching the land records. John includes that method in his list of six ways, but cautions not to rely solely on the registry of deeds because many assignments are not recorded. I think in a world of MERS, and missing paper, the land record system needs a hard look. The point of that system is to provide a public record of security interests in land, but it's clearly no longer serving that function in the way it historically has. In what ways is the land record system failing? How should we fix it? Do we need penalties for not recording assignments? Or federal regulation of MERS? Or something else entirely?

Comments

[Patches]

Man I have to check that out! Got to get John back on here! Been using his practice guides for years... Whenever I get stuck, its a great resource. Going to get boss to buy it.

[Mike Dillon]

As a fraudulent foreclosure victim in a non-judicial foreclosure state I've got one or two thoughts to throw out. At least in New Hampshire we have RSA 479:25 which provides a homeowner the ability to avail themselves of the court system and enjoin a foreclosure action. Notices similar to this are required to appear in the public notices of foreclosure actions: "RSA 479:25 YOU ARE HEREBY NOTIFIED THAT YOU HAVE A RIGHT TO PETITION THE SUPERIOR COURT FOR THE COUNTY IN WHICH THE MORTGAGED PREMISES ARE SITUATED WITH SERVICES UPON THE MORTGAGEE, AND UPON SUCH BOND AS THE COURT MAY REQUIRE TO ENJOIN THE SCHEDULED FORECLOSURE SALE."

NH also has "RSA 477:3-a Recording. – Every deed or other conveyance of real estate and every court order or other instrument which affects title to any interest in real estate, except probate records and tax liens which are by law exempt from recording, shall be recorded at length in the registry of deeds for the county or counties in which the real estate lies and such deed, conveyance, court order or instrument shall not be effective as against bona fide purchasers for value until so recorded." That said, I have yet to find any PENALTIES for NOT recording mortgages and/or assignments in a timely manner.

Cases exist where assignments weren't recorded until just days before the homeowner received notice of intent to foreclose. Well, let me back up - they weren't recorded until the borrower received the SECOND notice of intent to foreclose. The first notification was sent more than a year before the assignment(s) were recorded. Key Loan Transaction entries and/or e-mails show that the servicer and FC mill were having "difficulty" locating the assignment(s) back then. The allowance of en blanc assignments also allows for the last minute fabrication of assignments necessary to help execute many fraudulent foreclosure actions. Of course, if no one is paying attention when the docs are created, they also allow for the easy recognition of the same.

Should there be penalties for not recording mortgages, assignments, etc in a timely manner? Absolutely. Should MERS be put out of everyone's misery, especially given the growing avalanche of opinions involving lack of standing, bifurcation of notes and mortgages, etc. against them and their own CEO and Exec VP admissions that MERS has no actual interest in the notes they purport to be involved with? Without a doubt. But until such time as the individual states hit such severe budget crunches that they come to realize that MERS is costing their county registries literally millions of dollars I doubt that anything will be done to change things.

Attorney Gardner has a nice write up on RESPA and QWRs here last year. The info he provided might help to craft a rather effective QWR template for borrowers. http://www.creditslips.org/creditslips/2009/08/what-does-respa-have-to-do-with-consumer-bankruptcy-cases.html

Personal note: Professor Porter, THANK YOU for that reference to the Helping Families Save their Homes Act. You may have just contributed to the saving of at least one family's home. Off to research...

[Greg Jones]

One problemn with MERS and other such entities is that, by failing to record transfers, they effectively keep owners in the dark about the identity of the owner of the mortgage, and simultaneously cheat local governments out of recording fees. While the fees aren't much, as to any one transaction, for all the sales of mortgages in the secondary market over the last 20 years or so, the sums are significant, and have contributed to the cash-strapped nature of many local governments.

[E.A.]

Once we know, we forget we didn't know.

I remember getting a student loan as a naive 18-year-old in a financially un-savvy family. Even so, I thought it was necessary to establish some rapport with the loan officer during the meeting with him and my dad. After all, this was going to be a long term relationship, right? My reaction to the loan later being sold down the line a couple of times struck me as some kind of scam and breach of trust after our meeting and careful review of qualifications. My point is that young people and perhaps others can go into the loan process with little or no understanding of a loan as a product that the lending institution can sell. The basic difference between the owner of a note and the servicer may remain a hazy distinction for some, if they even realize that such a distinction is possible.

[Michael]

This is a very usefull article to anyone who is trying to negotiate a loan modification. The reason is that so often the loan servicer is the only entity you can communicate with. However, the servicer or their loss mitigation department will tell you the investor said this or that, yet you have no way to confirm or deny anything.

[Sam]

Of what value is knowing the "owner" of the obligation if the servicer is known? Who do you make payments to, the servicer or the "owner"?

Default on the underlying obligation authorizes foreclosure in non-judicial states, and in most, the lender cannot maintain an action to enforce the note. Is there any question that the borrower is in default on the note for failure to pay? If the borrower wants to reinstate, he can do so, and he doesn't have to know who the owner is to do that.

All of this clamoring about production of the note is noise to give consumers hope that they'll be able to keep homes they can't afford. Why encourage them? They should move out and rent a place already so they don't have to meet me in eviction court.

[Sam]

edit: The lender cannot maintain an action on the Note once it elects to foreclose.

[Mike Dillon]

Sam, there may very well be questions as to whether the borrower is in default for failure to pay. Depends on whether the foreclosure was fraudulently manufactured for one thing.

Separately, and I'm sure that those with law degrees will correct me, there is the issue of legal standing per Article 3 of the Uniform Commercial Code. To get minorly technical both constitutional and prudential standing are, I believe, required. Without legal standing, the note holder legally cannot foreclose on a borrower. Of course, it's only ILlegal if they get caught.... Try reading "Where's the Note, Who's the Holder" by the Hon. Samuel Bufford and formerly Hon. Glen Ayers.