Re: [tips_and_tricks] Re: A response of foreclosure
> In the motion note that the Plaintiff failed to provide evidence of a clear chain of title AND evidence that the Plaintiff has the ORIGINAL (not a copy) note.
While you always want to press for the production of the original Note & Deed of Trust, in many cases the foreclosing party is not required to produce it & the far more important issue is WHO the "holder in due course" (Black's Law Dictionary, 6th Ed., p. 731) is. See e.g., In re Adams, No. COA09-1455, 693 S.E.2d 705 (N.C. court of appeals 2010):
Excerpt (emphasis added):
Respondents in the present case admit that "[t]here is no evidence that the copies of the Note and Deed of Trust referred to in the affidavit were not the exact reproductions" of the original instruments. Because respondents do not dispute that the photocopies are "correct copies" of the original instruments, we conclude that Deutsche Bank for Soundview was not required to present the original Note and Deed of Trust at the foreclosure hearing to establish that it was in possession of these instruments. Nevertheless, while "[i]t is the fact of possession which is significant in determining whether a person is a holder, and the absence of possession defeats that status," see In re Foreclosure of Connolly, 63 N.C.App. at 550, 306 S.E.2d at 125, "[m]ere possession" of a note by a party to whom the note has neither been indorsed nor made payable "does not suffice to prove ownership or holder status." See Econo-Travel Motor Hotel Corp., 301 N.C. at 203, 271 S.E.2d at 57 (emphasis added). Thus, since the photocopies of the Note and Deed of Trust presented to the trial court indicate that the original holder of both instruments was Novastar, not Deutsche Bank for Soundview, and since these photocopies do not indicate that Novastar negotiated, indorsed or transferred the Note to Deutsche Bank for Soundview, respondents contend the photocopied instruments alone were not sufficient to establish that Deutsche Bank for Soundview is the current holder of the Note. Cf. In re Foreclosure of Helms, 55 N.C.App. at 69-70, 284 S.E.2d at 554 (indicating that the party seeking to foreclose by power of sale and the party named as the original lender and holder of the note and deed of trust were one and the same, and so concluding that the photocopies of the original instruments were sufficient competent evidence to support the trial court's findings, including its finding that the party seeking to foreclose was the holder of the Note).
That case is directly relevant to one I was working on last night & this morning - the Note & Deed of Trust show that the original lender is the "holder", not the bank which filed the foreclosure action, and there has been no evidence presented which shows that the Note & Deed of Trust have been assigned, sold, or otherwise transferred to the bank which initiated the foreclosure action. So even though that bank has correct copies of the original documents, just having them in their possession does not make that bank the "holder in due course" entitled to exercise a power of sale, and even if they produced the original documents, it still wouldn't make them the "holder".
Unless you dispute the validity of the Note and/or Deed of Trust & have some proof that what's been presented isn't valid, the key issue is who the holder in due course is & if a different entity from the loan originator, how they came to be the holder - i.e., "chain of custody".
In other words, if you were buying an older home & went to the register of deeds office, you'd expect to find a continuous chain of ownership going backwards, showing everyone who ever bought & sold that home. If there are any gaps, you've got a problem & no title insurance company will issue title insurance until the gaps are filled in. The same is true with a Note & Deed of Trust - it may have changed hands numerous times since the loan was originated & that's fine - but there must be a record of every single transfer from one holder to another & in a foreclosure action, the foreclosing party bears the burden of proving not only that they are in fact the holder, but how they came to be the holder.
Now here's another important point - nearly all Notes and/or Deeds of Trust will have a clause which says the Note (or DoT) can be sold or otherwise transferred an unlimited number of times without notice to the Borrower, but if you're dealing with a "federally related mortgage loan" & nearly all residential mortgages are, notice of every single transfer is required by 12 U.S.C. § 2605, regardless of any such clause:
(b) Notice by transferor of loan servicing at time of transfer
(1) Notice requirement
Each servicer of any federally related mortgage loan shall notify the borrower in writing of any assignment, sale, or transfer of the servicing of the loan to any other person.
So while you should always request specific information in writing, pursuant to your State statutes & Section 809 (Validation of Debts) of the FDCPA, even if you failed to do that, 12 U.S.C. § 2605 still applies (assuming a federally related mortgage loan) & I have yet to see a situation where proper notice was given pursuant to that statute - especially with all the mortgages that ended up in a package of "asset backed securities" & nobody knows where the original documents are, or how many times the mortgage has changed hands.
So don't hang you hat on just the production of the original documents - what's far more important is who actually owns the debt @ issue & has the legal authority to initiate foreclosure proceedings. In the mortgage cases I've worked on, the foreclosing party could not prove that they were indeed the "holder in due course" - they didn't have the original documents either, but that was a secondary issue.
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