What happens when a lender can’t produce the original note?

Reblogger Roger Johnson
Real Estate Agent with Hickory Real Estate Group

This is a very good article by Rick Misitano, a paralegal with the Law Offices of James M. Bosco & Associates, on foreclosure and how to help you if you find yourself in that situation.  Specifically, it is on the "Produce the Note" defense of foreclosure.

It's very good information, but always check with a local attorney that will know the specifics of your state's laws concerning foreclosure.

Original content by Rick Misitano

A growing number of homeowners around the country are using a foreclosure defense that may help them retain their homes. It’s called “Produce the Note” and we want you to know this is not a mere technicality that should be treated lightly by the lender or by the Court.

Everyone needs to understand the importance of this issue. When a lender can’t produce the original note, allowing a foreclosure to proceed puts the homeowner at risk of owing that debt again to another party in the future. Therefore, great caution must be taken before a judge can allow someone who can’t produce the original note to cash in on your home.

What if Your Lender CAN’T Produce the Note?

So, what happens when the lender tells the Court it can’t produce the original note, because it is lost? Let’s start with the basics. If a lender wants to foreclose on a property, it has to be able to show that it is, in fact, the appropriate person to whom the money is owed. That right to foreclose belongs ONLY to the person who has legitimate POSSESSION OF THE ORIGINAL NOTE - not a copy, not an electronic entry, but the original note itself with the original signature of the person(s) who allegedly owes the money along with appropriate raised notary seal and signature. So, if you are faced with a foreclosure, you have every right to demand that the person or entity trying to take your property, first prove to the Court that they have the legal right do to so in the first place by proving they have legal possession of the original promissory note.

In my opinion, an original mortgage note is much like legal tender and should be guarded and protected as such by the person holding such an asset. Loosing an original mortgage note is like loosing a $100 bill or a gift card or a lottery ticket. What if I scratched that million dollar ticket and just stuck it somewhere and misplaced it? Do you think I could just show up at lottery headquarters and claim my prize without having the winning ticket? The same principle applies to the person or entity claiming to be the legal holder of an original mortgage note. He who holds the note holds the key.

What the Lender Must Do

What often happens, however, is that the lender claims it doesn’t have the original note, because that note has been lost or destroyed. If the lender is making such a claim, the law requires the lender to prove all of the following under the “Uniform Commercial Code”, which is a set of laws governing commercial transactions that many states have adopted. It contains a specific provision on this subject (Section 3-309) which states that a person can enforce a promissory note without having the original, BUT only under certain limited circumstances.

1. The person or entity has to swear and attest that it no longer has the original note;
2. The person or entity has to prove that it was properly in possession of the note and was entitled to enforce it WHEN it lost possession of the note;
3. The person or entity has to prove it didn’t “lose” possession simply because it transferred the note to someone else (i.e., it’s not really lost); and
4. The person or entity has to prove that it cannot produce the original note because the instrument was destroyed or its whereabouts cannot be determined or it was stolen by someone who had no right to it.

All of these matters have to be definitively proven by the person or entity trying to foreclose on the property. It is not the obligation of the borrower to prove or disprove any of this. The borrower can challenge the right of the person or entity trying to foreclose and demand proof.

The Court’s Important Role

It is up to the Court to determine whether the lender has satisfactorily proven why it no longer can produce the original note. The Court also has to be satisfied that when the original note was lost, the person trying to foreclose on the property had possession of the note at the time it was lost. Until the Court has been satisfied of all of this, the foreclosure cannot proceed.

It is also important for the Court itself to understand that this issue is not merely a “technicality” and the judge should not be satisfied with anything less than full proof of this issue. The Court itself needs to appreciate the fact that if it should agree that an original note has been legitimately lost (and allows the foreclosure to proceed) it is the borrower who is still at risk.

Why? Because incredibly, even if a Court has found that the original note is lost and the foreclosure sale is finalized, if someone later turns up with the original note and proves that it is the proper holder of the note, and not the person who foreclosed on the property, the original borrower is STILL LIABLE.

That’s right. Someone took your home and the Court allowed it because it believed that the lender proved that the note was lost and it was the proper party. Then someone legitimate shows up in the future with the actual note and you still owe that person the money even though your property was taken with the blessing of the Court. Trust me, this is a very serious issue regarding post foreclosures and post pre-foreclosure short-sales. It has happened to three of our own clients! These homeowners had the need to sell their property by means of a negotiated short-sale (so they could avoid a foreclosure) only to find out that the entity claiming to have the legal right and authority to enter into such negotiations and accept such settlements sold their note to another entity and weren’t even aware of it. Several months later, the newly assigned lenders (now claiming to be the rightful owners of our client’s original notes) have since come forward and have also filed suite seeking to recover their entire outstanding principle balances owed to them (prior to the homeowners closing their short-sale transactions with the wrong note holders).

How fair is that?!?! It’s not! And that’s why homeowners need to start fighting back when someone is trying to take their home by foreclosure, especially since an overwhelming percentage of mortgages granted over the last 3 to 5 years have been packaged into securities and re-sold and re-assigned numerous times since the inception of the borrower's original note and mortgage. In some states, homeowners have better than a 50/50 chance of being successful in defending themselves against a completed foreclosure. Why wouldn’t anyone who owns a home do everything in their power to protect and defend it?

All the Best,

Rick D. Misitano, Senior Paralegal
Law Offices of James M. Bosco & Associates
Methuen Executive Park
240 Pleasant Street
Methuen, Massachusetts 01844
Phone: (978) 687-8804
Fax: (978) 687-8872


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James "Jim" Vitale
Mighty Realty - Apopka, FL

Great article, thanks for sharing!  I heard a story where someone was facing foreclosure some 15years ago and the lender couldn't produce the original note.  As a result he is still in his home today.  I always thought it was an old wive's tale... guess it may be true!

Aug 18, 2009 07:58 AM #1
Konnie Mac McCarthy
MacNificent Properties, LLC - Cobb Island, MD
Broker/Owner - VA & MD "Time To Get A Move On!"

I read this post by someone the other night.. and what I dont' understand is it said something about even if your house was foreclosed on..someone could produce a note..and force the homeowner to pay on that note even though the house had been foreclosed on.. that is a little scarry

Aug 18, 2009 08:13 AM #2
Donna Osborne
Keller Williams Chantilly Ventures - Chantilly, VA

I have never understood why a mortgage company would rather have a home go to foreclosure than to work with the owner and/or allow a  short sale.  Homes in our area have sat empty for long periods of time.  Water damage and mold are huge problems!  I hope one day the banks that don't follow the rules or attempt to work with homeowners and their agents get a taste of their own medicine.  Below you will see what I found on comsumerwarningnetwork regarding non judicial states and the term "produce the note"

I believe Virginia falls under this catagory: 

How to use "Produce the Note" in Non-judicial Foreclosure States

March 5, 2009

homeClick on this story for the "Produce the Note" how-to step by step instructions.

In some states, a lender can foreclose on your home without going to court.  These are called non-judicial foreclosure states.  You can still use the "Produce the Note" strategy in these states, but it takes a few more steps on your part.

First, the concept behind "Produce the Note" is this:  When a homeowner is faced with a foreclosure suit, "Produce the Note" requires the lender to prove it has the actual authority to foreclose, by requiring it to officially produce the original promissory note in the lawsuit. But if there is no foreclosure lawsuit, what can homeowners do?  In these "nonjudicial foreclosure" states, such as California, Texas, or the thirty or more other states with similar procedures, the homeowner has to file a lawsuit against the party trying to foreclose.


Here's how it generally works:

  • In a state with nonjudicial foreclosure procedures, a foreclosure sale can be initiated by the lender without using court proceedings.
  • Homeowners receive a "Notice of Intent" letter informing them that a foreclosure sale will be scheduled unless the overdue debt is paid within a certain amount of time.
  • If the debt is not paid accordingly, a "Notice of Sale" is then sent informing the homeowner that a foreclosure sale will take place at a particular time and place.
  • No lawsuit is ever initiated by the lender and the courts are not involved.
  • Without a lawsuit, you cannot use judicial procedures to require the lender to "produce the note."
  • Merely sending a private letter to the lender "demanding" that it produce the original note to the borrower may be met with utter disregard or outright refusal by the lender.

So, here's what you can do:

  • In a nonjudicial foreclosure state, in order to protect yourself by demanding that the lender "produce the note," it will be necessary for you to first actually file your own lawsuit. Even in such nonjudicial foreclosure states, no law prohibits you from instituting your own lawsuit challenging the right of a lender to foreclose on your property.   The lawsuit would allege that:
  1. the lender has sent a Notice of Intent to Foreclose;
  2. the homeowner is unsure as to whether the lender still possesses the original debt instrument, upon which the lender claims the right to foreclose;
  3. the homeowner wants proof of such authority; and
  4. the court should intervene and prevent the foreclosure from taking place unless and until such proof is presented.
  • Initiating litigation to protect your rights is never a simple process. Requirements as to what must be contained in a pleading, how the facts must be plead, who should be named in the pleading, and how the pleading should be officially "served" on the lender, all differ from state to state.
  • Once a lawsuit is initiated, however, all states have judicial procedures that allow a party to require the other side to produce relevant documents, and the "produce the note" strategy can be used.

Often times, the best way to protect your rights in these situations is to seek professional help from an attorney licensed to practice in your geographical area. Getting involved in a lawsuit by representing yourself, especially if you file the lawsuit yourself, is not easy, but you can do it.   Every citizen is able to  represent themselves and file a lawsuit on their own.  It's called pro se, which means "on ones own behalf."

If you can afford a lawyer, then by all means, hire one.  There are attorneys who specialize in real estate matters, and either advertise or can be found in the yellow pages. Most areas have bar associations that maintain lists of attorneys willing to help in specific areas of the law.

Finally, there are usually "legal aid" organizations around set up to assist individuals who may have difficulty paying for the services of an attorney. A good place to begin your search is by going to the Legal Services Corporation website.

So, even if you are in a non-judicial foreclosure state, you can use "Produce the Note."  This is your home, and if you want to fight for it, you do have a way.

Aug 24, 2009 05:34 AM #3
Ryan Shaughnessy
PREA Signature Realty - www.preasignaturerealty.com - Saint Louis, MO
Broker/Attorney - Your Lafayette Square Real Estate Partner

Roger - I work in a non-judicial foreclosure state.  There is no requirement that the trustee produce the note.  The only ways to stop a foreclosure are bankruptcy or suit for injunction.  However, the injunction route requires a bond which is likely to be equal to the amount of the past due debt.  We have successfully challenged foreclosure sales on technical grounds - like defects in the acceleration clause of the note or failure to properly appoint the successor trustee.  Unlike most lenders, we still record the orignal note with the deed of trust and have never had anyone challenge the recorded instrument - whether or not we could produce the original or not.

Nov 02, 2009 03:59 AM #4
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Roger Johnson

Realtor - Hickory NC Real Estate
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