New foreclosure defense: Prove I owe you Homeowners demand lenders produce original documents - some can't.

The Associated Press updated 2:59 p.m. CT, Tues., Feb. 17, 2009 

ZEPHYRHILLS, Fla. - Kathy Lovelace lost her job and was about to lose her house, too. But then she made a seemingly simple request of the bank: Show me the original mortgage paperwork.

And just like that, the foreclosure proceedings came to a standstill.

CONTINUED : 'Don't leave your home'

Chris O'Meara / AP "I'm going to hang on for dear life until they can prove to me it belongs to them," says Kathy Lovelace, a 50-year-old divorced mother who owns a $200,000 home in Zephyrhills, near Tampa. "I'll try everything I can because it's all I have left."

****

So glad to read the above report.

Just as in my previous articles Foreclosure Is Good Stuff for a Market, Isn't It, Marissa? A Funny World (25): God gives you a chance to stand up again A Funny World (16): Why ASK Lender's Mercy? Why Don't You Do Lender a Favor?, I wrote that "don't hand out your keys to a lender."  Foreclosure is a big crisis to you, but it can be turned around for you to save a lot of money to freshly "stand up again," if you know how to take the advantage of it. 

Everyone wishes he could have a "Rich Dad" to provide all the needs, including a free shelter, right?  Stop wishing.  The foreclosure law is a Good Stuff, a chance for some to have a "Sugar Daddy or Mommy" to stay and live in your home without making monthly loan payments for a long long time.  Say if you are working on a "Short Sale."  A short sale is a long process, at least 6 months or more.  I personally went through that in 1993-5 and lived there in Arcadia, CA rent-free for two years.  How much I saved?  The money saved is earned, right?

How much a distressed home owner can save?  Let's take example from the news report California Foreclosure Center Shows Obama Challenge (Update2) .  It reports: The Obama plan probably can't help Merced residents Bountay and Khamtanh Rattanavongsa, who walked away from their adjustable-rate home loan last year and were foreclosed upon after monthly payments jumped to $3,500 from $1,800.  If Bountay can do a short sale or has a right legal ground to approach the issue, she may save $42,000 in a year or $84,000 in 2 years and number goes on. 

That's when some follow agents recommend doing Deed In Lieu of Foreclosure to save a homeowner's credit, I don't like the idea and rebut its benefits before.  Here comes the new strategy to ask "promissory note" to prove I owe you, the banker, money.  Actually, it is not a new tactic and I can think out some other goodies in this legal field. (such as a mortage may have so different legal effects; it depends on if it is a "cash loan" or "credit loan.")  Let's just talk about "promissory note" for now.

Most people believe that a foreclosure can be done by a piece of paper called "trust deed" or "mortgage" so that they only need that paper recorded.   It is far from truth!  They ignore the importance of the "promissary note."  Therefore, no banker requests a NOTE to be recorded.   To the logic of many people, it is very reasonable to assume a debt does exist if there is a proof of recorded "TD."   Not so in the eyes of law.   A banker needs BOTH papers to complete his foreclosure.   Short of one, there is a BIG problem to finish it and take the property back as his REO.

What could happen if a banker is unable to produce the original "NOTE"? (In fact, so many bankers are misplacing the original "notes" in these days after ABS security derivatives are invented, sold and re-sold by Wall Street and mortgage servicing is outsourced into India.) 

Well, a faxed or electronic copy MAY not be good enough to be accepted by a judge. (It could all be depend on how well he was treated last night by his honorable wife.)

Well, there is no way a home owner can erase the recorded Trust Deed. 

Well, there is no way a banker can foreclose the owner's property if he is unable to show the original copy of note.

Well, there is no way for a title insurance to issue a policy to insure the property so that there is a "cloud" in title.  No transaction is reasonably possible if there is no "free and clear" marketable title.   Almost the property is NOT sellable.

Then, what comes next? 

The result is very clear. that owner is able to live in the house All HIS LIFE WITHOUT making a penny to pay a monthly loan payment.  Good enough and Congratulations!  You have your lender as your "Sugar Dad."  Unless  there is a settlement or a sale acceptable to the owner, nobody can force him out of the house since we are a society ruled by law.  Period.

Don't give your sympathy to the poor lender yet.   A lender will finally recover his money when the house is sold in the future.  Since there is a recorded TD, the owner/ seller has to remove it in order to sell.  That's the only chance when a banker can see his money back again.   But for how long it will take place?  I am so sorry to tell you "only God knows."

So, what or whom a loan modification is working for?  Those politicians have played politricks trying to portrait the homeowners as the ONLY victim or in disadvantage.   Even it is a partial truth, it is NOT the whole truth at all.   In fact, they know what mistakes their buddies made and pull out the smoke guns to cover up the asses of big fats in order to benefit a banker, withut notice of the public.   The truth is they only have those financial institutions in their minds and disregard others.  Even when their politricks talking so sweet about saving the homeowners, those politicians are not ignorant, but with bad intention as some people claimed, to rescue a banker by RE-Writing a brand new set of loan documents to nullify the original ones. 

The fact that bankers have their original copy of note in place makes their "foreclosure" offense very effective; and how about your copy in your file?  It really doesn't matter in your defence, unless you are so nice/ "stupid" to voluntarily show yours to help them out in front of a judge, right?   So please fully examine your current home loan docs before you put your signature on a new set of so-called "loan relief" document promoted by our financial bureaucrats.  At least, ask those bankers to show you their original proof of IOU you signed when you took the mortgage out.   Do yourselves a favor by so doing, before you falling into the wolf traps and making yourself a fool or victim twice in the 2nd rounds of game. 

Hope you understand NOW that to prolong the real estate downturn by inflating housing price as those "stimulus" plans intend to or other plans such as NAR proposed 4% mortgage is a blackmail, not in the interest of general economy or private individual, let alone an agent member's.