No Note....No Payment?

[Klukie]

What is my obligation to my mortgage lender if they don't have the note to give me when I pay off my home? Should we have to pay for a home that we won't legally own when it is all said and done? I am a bit confused here (I am up to date on my mortgage).

[MineralMan]

1. Your obligation is to whomever holds your note. You may not

know who that is, but you are still obligated to make the payments you agreed to. That's the real answer. The note is somewhere. Someone owns it. It may be cloudy, but it will end up being determined eventually. If you haven't made the payments, you'll lose the property. It is that simple, really.

That's not to say it's right, but that's the answer that will end up applying. There is no chance, in my opinion, that existing mortgage notes will be forgiven or dropped.

You should have your copy of the note in your files. If you don't, you need to get it. It's recorded at the offices of whichever body records such things in your area. They can provide you a certified copy of it.

The bottom line is that someone, somewhere, is going to get paid. If they don't you're going to be on the street. Just keep paying your mortgate, keep a record of every payment, along with a cancelled check, and you'll be fine.

[Raven]

4. Agree completely except that in some states the note is not recorded

at the Registry of Deeds like the mortgage is. The mortgage references the note, it's date and the amount. It's up to the mortgagor (holder) to produce the note. You advice to pay each month and keep copies of the payments is right on.

[Klukie]

14. I will continue to pay...I guess I was just wondering if this mess...

is going to affect more people than those who are in foreclosure.

[hamsterjill]

41. Texas

In Texas, the note itself is not recorded; however a vendor's lien is normally held in the deed (or conveyance document) and a mortgage lien is established by the recordation of Deed of Trust or similar document, both of which are recorded in the County Clerk's records for real property.

[sabrina 1]

27. Not so. Some notes have been destroyed.

So they no longer exist. If your mortgage was transferred by MERS eg, then you may never discover who held the original note as witnesses have testified that notes were destroyed and replaced by MERS with documentation that often was not accurate, sometimes corrupted by false notary stamps etc. In effect, this entity, Mers, CHANGED the 200 year old laws of record keeping of mortgages without approval or even the knowledge of anyone but the Banks who created the entity.

The truth is there is no correct answer at the moment to the question this OP asks. Each case is individual at this point. First thing to do is ask for the note. If one exists that can be traced properly, then it's okay to continue making payments.

If not, some people have advised putting the mortgage payments into an escrow account until ownership can be established. If the house was a fore-closure, then the chances are that someone may come back claiming ownership if the foreclosure was done illegally.

Even lawyers are not certain what people ought to do.

[Ozymanithrax]

2. Well, you do owe someone, even if it is uncertain who you owe.

If you stop paying for your mortgage, the banking institution will notice and, in time, take your house away from you through legal processes. The current moratorium is a delay only, not a permanent state.

Eventually, to keep your house you would need to prove your case in court before a judge against some very expensive lawyers.

In the meantime, with the first missed payment they will begin destroying your credit score, which will affect future decisions to purchase anything.

Is it worth the loss of your credit, extreme hassles with creditors, paying a lawyer, and taking it to court with no idea whether you will get our house or just end up paying for the lawyers on both sides and losing your home?

No matter what the mortgage industry has done wrong, these cases are not cut and dried.

[Klukie]

3. So these notes are not permanently lost then?

[Ozymanithrax]

5. They may be lost...but is destroying your credit and losing your home...

a risk you are willing to take.

I and my wife are up on our payments. We owe far less than what the house is worth. In my records, between 2002 and 2007, I have notices that our account was bought by other banks or holding companies six times. We refinanced once to combine a time share we bought. I have no idea whether the people I owe money to actually holds the note. It isn't worth the loss of my credit or my home to find out.

I've been homeless once in my life, spent six months living in a car with a wife and a baby. I borrowed the money to buy a house in good faith, after saving a large down-payment. I have no problem paying what I owe. I keep very good records.

[Klukie]

8. This is more of a philosophical question..I have no intention of not paying my debt.

And no...I am not much of a risk taker.

[jtuck004]

6. The notes are not the problem - the titles are the problem.

There are state laws governing the transfer of titles. They were evaded, perhaps to avoid paying fees, maybe for expediency, maybe just arrogance.

So the problem is that the note is still owed, but the collateral underlying it was never transferred correctly.

Which means that the people who invested in the mortgage-backed securities would seem to be in a position to put these back on the big investment banks that did not deliver what they promised.

The homeowner is left owing an unsecured note, and with a home that, until this is cleared up, very likely cannot be sold because no one is going to insure their title, and in theory cannot be foreclosed on legally, though that hasn't stopped some of the banks.

[Klukie]

7. Okay so will this or can this affect someone who pays off their note?

I am still a little confused?

[jtuck004]

10. It is possible, though probably not directly if you are not .

selling the house anytime soon. And not everyone is involved - from what I have read it is about a third of all homes.

But let's say you pay off your note which clears the debt, but who then makes sure your title is cleared of the lien?

You may own the home, but without the papers that prove state law was followed in the transfer
who is going to insure it?

And that could affect values even for people whose titles were not involved.

Your lender could probably answer your questions.

[Raven]

12. It is very confusing and I suspect that the government will have to step

in at some point to clarify it. If you have proof that you have made all your payments, the mortgagor should execute a Discharge of Mortgage that gets recorded. Under normal circumstances, you would get your original note returned with "Cancelled" stamped across it and you could throw it away or frame it :-). The Discharge of Mortgage is the important document because that is absolute proof that you paid in full and that's what affects the title to your property. In other words, if I was buying your property, I'd be looking for the Mortgage Discharge, not the note.

[EFerrari]

26. It can affect any homeowner. The banksters have seized properties

that weren't even mortgaged.

[Klukie]

11. You mean if I wanted to just put my house on the market and the title transfer was not correct...

I wouldn't be able to sell my house?

[jtuck004]

13. That is certainly possible. Who is going to insure

that your title is correct if the chain of documents is not correct? What kind of legal action does that
leave them exposed to?

Lots of uncertainty.

Wall Street - the gift that keeps on giving...or taking.

[flvegan]

20. Depends.

Did you buy an Owner's title policy when you bought the place? If so, your underwriter has to correct any underlying problems with the conveyance so that your title is marketable.

A lot of people are confusing real property title and the encumbrances to it.

[Klukie]

29. I have no idea if I bought that....Is it is something required or recommended?

Does it apply to each state?

[flvegan]

31. Title insurance is highly recommended.

All 50 states recognize it. An owner's policy is not required. If you are taking out a loan to purchase, you will be required to buy a lender's policy (to protect the lender).

[Statistical]

33. One thing many homeowners don't understand is that lenders policy only protects lender.

IF it turns out your property has bad title (there was another owner who did no consent to the sale, or an unknown lien attached to the property) the lender policy covers the lender. The title company will pay the lender for any loss. It does not to protect the owner.

Owner's policy (less than 0.2% to 0.5% of property value) is usually very cheap but some people decide to save couple dollars.

[dixiegrrrrl]

24. THAT is the question.

If the note was NOT lost, there would have been no need for the foreclosure mills to pay the Docx firm to create
notes, affadavits, etc.
the note was supposed to be transferred in an unbroken chain from the lender to the Mortgage Trust that held the bonds.
did not work that way, apparently.

Many people are now asking their servicer for a copy of the note, to make sure they are paying the right person.
And the servicer is ignoring that request.

I have NO trust in BOA, who is collecting my payments, to give me a paid off note at the end of the mortgage contract.
So I will have a lawyer draw up a request note.

In Pinallas ( ?) co. in Fla, one court is setting up an account that the homeowner can pay the mortgage into , while waiting for the servicer to produce the note.
If no note appears, the court has ruled there is no one legally available to collect on the mortgage.

Be aware, SOMEBODY still is owed an "unsecured loan" or promissory note, there is a legal obligation we signed when we got the mortgage. But that would then be a loan NOT secured by the house.
But WHO legally should get the payments is a mystery which needs clarification to protect the homeowner.

Do not try any of the above with out a good real estate attorney.
Be aware I am only stating what I have read from the many good blogs and news articles on this situation, and nothing I say should be construed as legal advice.

[sweetapogee]

36. not only will your

credit score will dive, you will take a huge tax hit and you will not be able to sell the property or use the eq for a loan. You will have to take out a separate homeowner insurance policy (assuming your mortgage co pays your insurance from escrow) as well as your local property taxes. Once you strip out insurance and property taxes (if you live in a high tax state) you will be surprised how much of your mortgage payment goes to that and not the principal. After all is said and done, there is a lien on your property until the note is paid.

Interesting question though.

[lunatica]

9. If they don't have the note they don't own the loan either

And if you want to sell good luck with that. No Note no sell.

this is why it's a mess.

[Raven]

15. If the mortgage has been assigned and the Assignment of Mortgage has

been recorded, isn't that enough?

[DemReadingDU]

18. That's the problem with MERS

Mortgage Electronic Registry Service (MERS)

Mortgages are entered into MERS, then get transferred, but the note doesn't. That is why so many foreclosures are in trouble, because the current lender can't prove they have the original note. Documents have been 'mishandled', and some actually forged notarized signatures. So the Attorneys General in all 50 states are investigating this mess.

But the issue isn't just foreclosures, it's any mortgage entered in MERS. The current lender might not be able to prove it has the original mortgage note.

[Raven]

17. If the mortgage has been assigned and the Assignment of Mortgage has

been recorded, isn't that enough? The note follows the mortgage doesn't it? Couldn't a new note be executed with a recital that the original note has been lost and that certain payments have been made and that the new note replaces and supercedes the old one?

[DemReadingDU]

19. If the mortgage is in MERS

The note usually is NOT recorded when the mortgage is transferred. BIG mess.

edit: from my reading of MERS, it was designed to be electronic, so it is alleged that the original mortgage notes were destroyed, and when the mortgage is transferred, it is not recorded. MERS did not want to pay recording fees.

[Raven]

21. Even before MERS the note was never recorded, at least not

in Massachusetts.

[DemReadingDU]

25. I'm not in Mass, so not sure

The main problem that I have read, is that the original mortgage note has been allegedly destroyed. And with mortgages transferred several times in MERS, there is not a chain to link them together. So it's difficult to determine which lender can foreclose.

And more importantly, on any mortgage in MERS that has been transferred, when the mortgage is paid offf, the title/deed may not be clean.

[DemReadingDU]

16. Who can prove my payments

Who can prove my payments actually went to pay on my mortgage, if the lender can't prove they have my original mortgage note?

Perhaps the payments weren't really made to the current lender? Perhaps the payments were made to a black hole, and not accurately tracked? Perhaps in the huge number of foreclosures, not only was the paperwork 'mishandled', so were the payments?

[EFerrari]

22. You've actually raised a very good question that no one has addressed yet.

If you don't know who is holding the note, there is no guarantee whatsoever that your payments are going to maintain or pay down the note. And since contracts have to name the parties, Houston, we have a problem.

You're not the only one who is confused, by any means. Wall Street has screwed up the financing and transfer of property so thoroughly, I'm sure there are teams of lawyers in New York and in DC working on this around the clock because NO ONE knows the answer to your question.

And it wouldn't be unreasonable for homeowners all over the country to go to court on this very question. I imagine Wall Street is wetting itself over this right now.

[flvegan]

23. Where are you getting that you won't legally own it?

[Klukie]

28. From my own thoughts...

I am a bit confused in this regard...but one one buys a car thru financing the bank holds the title and when you pay it off then they give you the title as certificate of legal ownership...right? Is it not the same for a house?

[flvegan]

30. Not really, no.

You are correct about a car. Real property is different. Real property is owned when fee-simple title is conveyed to a buyer. If the buyer has to obtain a loan to purchase the property, they encumber it two ways (in most cases). Some states use a mortgage and note. This is an encumbrance to the fee simple title, but not a conveyance. The borrower still has full ownership of the property. Other states use a deed of trust. This is much more complicated. A deed of trust puts the right to convey in a third parties hands if the loan is defaulted upon. The borrower still owns it, though. The bank does not "own" the property, the borrower does. These ownership documents as well as the mortgage/deed of trust are placed of the public records for disclosure.

The big monkeywrench in this can be if the structure on the land is a mobile home. The lender will most often hold the title to the mobile home, but the land/dirt is owned by the borrower.

[Klukie]

35. but in the event that the owner pays off the debt and there is no note to prove it....

how do they receive the deed? Or do they never recieve the deed?

[flvegan]

37. They already have the deed.

The deed vests the owner in title. If the worry is that the debt is paid off, but the Note is never sent to the borrower, that's not of huge concern. So long as the satisfaction is recorded. Any attempt to foreclosue can easily be defended.

[Statistical]

32. No. You don't buy a house from your lender. Deed/title and note are seperate entities.

You have a deed or title (same thing but different names - filed w/ your state). You usually can pay a fee and receive a copy of the deed/title to your real property from the state. It shows that real property was transfered from the prior owner to you and the date of the trsnsaction.
When you purchased the house from previous owner you paid the previous owner to transfer the property to you free and clear at the agreed upon price and terms. In that transaction the deed for the house was transfered from previous owner to you. This part of the transaction always occurs no matter if you pay cash or need financing.

Say the house selling price was $200K
Now if you are like most people you didn't have $200K in cash to pay. The real property must be paid in full to transfer ownership, so simultaneously a lender gave you the $200K which then was transfered to the previous owner (meeting owners conditions and allowing transfer of the property). Now to protect the lender you signed a NOTE (a promisary note to pay). Essentially a writen contract to repay the money the lender gave you to purchase the home. The note sets the terms and conditions of the loan/mortgage between you and the lender. It also stipulates what happens if/when you don't pay.

Remember the two items are completely seperate.
Deed/tile = record of OWNER of REAL PROPERTY - you
Note = contract to repay money borrowed from bank - between you and lender

If you are a homeowner YOU and YOU ALONE own your home. People often say "the banks owns most of my house but that is a misnomer". You 100% own your home. The deed filed with state shows ownership of that real property. You also happen to owe the lender some (usually lots) of money. To protect the lender if you don't pay there is a condition in the note (which is a contract) which you agree to allow the lender to sieze your property and allow its sale to satisfy any money owed. That process is called foreclosure.

In a foreclosure 3 elements must be proven to the satisfaction of the court
a) that you are the owner of the property
b) that the person suing is the lender
c) that the terms of the note have been violated

a is proven by the deed.
b is proven by the original promisary note plus any transfer paperwork in the lender changes.
c is proven by your payment record (or lack of payments)

without all 3 elements the property can't be foreclosed.

If the lender can't produce the original promisary note then they can't prove that they even have standing to sue or that you own any debt to them.





Seperately from that their is a note. You signed a promisar

[Klukie]

34. Thanks for the info...

so how does one obtain the deed when all obligations are met under the promissory note that the bank doesn't have?

[Statistical]

39. In most states you ALWAYS have the title.

It is yours the day you bought the home.

The bank simply has a security interest in the property. You don't suddenly get the title ONCE you pay off the mortgage. You have the title (filed w/ your state) the day you closed on your property. It is YOUR property.

The bank will issue a letter once you pay off the mortgage indicating that the mortgage is paid off and the bank no longer holds a security interest in the property. That combined w/ original note are your "proof" that nobody else holds an interest in the property.

[DirkGently]

40. Nicely done.

[ms.smiler]

38. Klukie, you are asking a very good question.

It's only because I cared about what was happening to other people that I began researching foreclosure and mortgage issues and as a homeowner with a mortgage, came to realize that I too was part of this mess.

My best suggestion for you is to find a good real estate attorney that has experience with Quiet Title actions. You can continue to make the mortgage payments that you believe are due. The case will take 3 to 6 months and address any fraud in your mortgage as well as who may own your Note and if anyone has a valid lien on your property. Chances are very good that no one can prove a valid lien and you receive your Deed and any compensation due to you.

Of course your mortgage servicer prefers that you not ask any questions and just keep sending them a check every month until they eventually get around to your mortgage with an attempt to trigger a supposed default.

The first step for either you or your attorney is most likely a Qualified Written Request. Your servicer will most likely ignore the QWR and you begin your case with their violation of Federal law.

I discovered fraud in what I thought was a perfectly fine mortgage and with Treble damages, they actually owe me more than I might owe them.

I think this is an option worth exploring for you. The fraud in my mortgage disturbed me and after two years, I learned enough about the modern day mortgage industry that I had no confidence in a clear Title come the day my mortgage was repaid.