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Why Should I Ask To See The Original Note?


The "show me the note" movement pops up in the news from time to time. This article inspired me to write yet another post about the importance of demanding to see the note.

One of the most important questions to ask when faced with a foreclosure lawsuit is, 'Where's the original note?" Since the beginning of the foreclosure crisis, banks and their servicers have had serious difficulty producing original loan documents. They have had an even more difficult time proving that they are entitled to enforce the original note against the homeowner.

One of the major stumbling blocks for homeowners is viewing the original note. Banks and servicers don't seem to have the originals handy. Everything has to be requested from one storage facility or another. On the other hand, imaged copies of the note are easy to get. This means that, even when represented by counsel, many homeowners will wait several months before having an opportunity to view the original note.

In many cases, the original note does not match the copy filed with the foreclosure complaint. Banks tend to rely on some odd legal fictions to justify this discrepancy. One of the most common is that the copy is "imaged shortly after closing." It is then claimed that re-imaging the document each time it was indorsed or otherwise altered is simply not done. As a result, the use of an inaccurate copy of the note is merely inadvertent, and has no true bearing on the issue of ownership.

This argument is further bolstered by a second legal fiction. To transfer ownership of a promissory note, it must be indorsed and delivered to the new owner. Many notes are initially filed without indorsements. When the original is requested, it bears at least one indorsement, and usually what is known as a blank indorsement. A blank indorsement means that any person or entitiy in possession of the note owns it. Since indorsements aren't dated, the "inadvertent use of an old copy" argument suddenly becomes plausible, right?

I have successfully argued that the timing of the indorsement is very important. In both state and federal courts, standing (the legal ability to bring a lawsuit) must be maintained from the date of filing onward. This means that if a bank or servicer was not in possession of the indorsed note at the time the case was filed, then the bank or servicer lacks the legally required standing to bring the lawsuit.

This is why timing is key. If Bank of America sells a loan to Fannie Mae, but retains the servicing rights on the loan, Bank of America should technically deliver the indorsed note to Fannie Mae on the day that the loan is purchased. This way, Fannie Mae owns the note because the negotiation of the note is complete. What often happens is that Bank of America has never truly delivered the note to Fannie Mae, but kept the original to assist with the foreclosure process. Once the lawsuit is filed, Bank of America causes the proper indorsements to be placed on the original note.

This scheme fails because the indorsement and delivery of the note must take place before the case is filed. If the bank or servicer cannot provide evidence that it was in physical possession of a properly indorsed note on the date of filing, it cannot establish that it had standing at the time the case was filed.

"Inadvertent mistakes" and "scrivener's errors" are not as inadvertent as banks and servicers would have you believe. It is always important to demand the original note. If someone is going to take your home, make darn sure that it's the proper party.