There is circulating a popular legal concept for the homeowner to require the lender to produce the original promissory note in the event of impending foreclosure. The lender who is the holder in due course (this is legal speak for the entity that actually owns the Promissory Note) must prove that the debt is due when the servicing lender forecloses on the property.
To produce the note is sometimes very difficult because the note may be in the possession of the servicing lender, the secondary market investor, or someother entity as the note passes to various entities. With all of the mergers, bank failures, and takeovers over the last several months, many records have been lost.
To prove that the foreclosing entity has a rightful claim merely reequires the "keeper of the books and records" to testify that the debt is owed and they have the legal right to collect.
In order to offset the testimony of the keeper of the books and records, the homeowners would need to produce evidence that the entity does not know for certain that the note has not been transferred, or that the debt is not owed.
Obtaining proof is accomplished through discovery actions where you force the lender to produce the records that prove they have the legal right to collect or foreclose. You will need a competent attorney to do this properly. If you can prove that the lender cannot prove they have the legal right to collect the debt, then you can win.
In most cases, either the note will ultimately be produced or adequate testimony will prove the debt. However, this procedure will lengthen the time required to foreclose, providing additional time to get the short sale approved, even if the debt cannot be set aside. Remember, the homeowner is not saying they do not owe the debt; only that they may not owe the debt to this particular lender. With so many bank closures, mergers, and takeovers, that may be a fact.
When I represented consumers, it was not uncommon to find clients who experienced a foreclosure by the 
servicing lender, only to result in the actual holder of the note later suing them for the entire debt.
Technically, representing oneself can be done, but not well advised. Most short sale homeowners do not have the funds to take on a case using this strategy, and in most cases, the proof of debt will be presented with only a short delay in the case.
In judicial states, an answer to the original court Complaint or Petition must be filed within the time frame permitted by your state law. Then the discovery process would begin. It is possible to file a simple letter answer, which is often accepted by judges and deemed to be a legal Answer to the Complaint or Petition out of an abundance of caution. Then even at trial, this strategy could be implemented. However, it is best to let a good attorney handle it.
In non-judicial states, a lawsuit must be filed by the homeowners before the date of the trustee sale. Again, it is much more likely to be successful if a lawyer does it. The Complaint or Petition must assert a denial of the debt to the defendant. In some jurisdictions it is enough to state that plaitniffs are uncertain that the debt is owed to this defendant, while in other jurisdictions the plaintiffs must allege that they have reason to believe that they do not owe the debt to defendant. Again, taking these actions are costly if the homeowners hire an attorney. The Complaint or Petition would ask the court to require the lender to produce the note.
In any case, the original loan documents should be taken to the attorney for a forensic review because there is a good chance that there may also be TILA or RESPA violations as well. If the violations are serious enough, some attorneys may take the case on a fee contingency if there is a likelihood of a substantial award.
Generally, this "produce the note" strategy is seldom effective in practice, except for gaining time for the short sale process. This objective may well justify this strategy.
Ken Lawson, JD
TheLawsonGroup Mediation Services
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