Most plaintiffs never “hold” the original mortgage note

03 May Most plaintiffs never “hold” the original mortgage note

In the state of Florida, mill law firms file 11,000 foreclosure complaints per month, and the vast majority of those complaints are filed with the knowledge that the plaintiff does not have the right to foreclose.

What do I mean by that? It’s simple. The plaintiff must “own and hold” the mortgage and original mortgage note BEFORE the foreclosure case is filed. Ownership of a mortgage note is complete only after the following three things occur:

1. Indorsement of the original note by the originator
2. Delivery of the original indorsed note to the plaintiff
3. Acceptance of delivery of the note by the plaintiff

The problem is that the plaintiff rarely ever takes physical possession of the note unless or until a defendant fights the foreclosure.

In reality, the original promissory note was “sold” to the plaintiff, which is usually a tax-free trust known as a REMIC, but the original note actually never leaves the originator or the servicer. Therefore, even if the note was indorsed by the originator, the originator still owns it until the actual delivery.

Don't buy a car without the titleWould you buy a car without getting the title? Of course not, but then again, you’re not a high-powered banking executive whose brains were sucked out of his nose while he slept. I suggest banking executives had their brains removed because why else would they not get the original note when they acted as trustees for these REMICs?

Actually, the answer is simple. These mortgage companies were closing on loans in every nook and crannie throughout the country. Centralizing 10,000 of these notes (the average number of loans in a single REMIC) in one location, indorsing them and shipping them to the trust bank was time consuming. Actual delivery of the original note was . . . like . . . so yesterday.

Since only 1% or so of all foreclosures are contested, does any of this really matter? Why fix a machine that works 99% of the time?

So, the mill firms file these fatally flawed foreclosure complaints because they get away with it almost every time. Quite frankly, all it takes is knowing what questions to ask, and most foreclosures can be brought to a screeching halt.

However, there’s a bigger issue here. If the mortgage industry, as a rule, files foreclosure after foreclosure, knowing that the transfer of ownership of the note was not completed prior to the commencement of the case, isn’t that some kind of large-scale fraud?

Uh, yeah. . .

So, what happens if the plaintiff produces the original note after the case is filed? Stay tuned.

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Chip Parker is the managing partner of Parker & DuFresne, P.A., where he represents Northeast Florida businesses and consumers facing bankruptcy, and homeowners facing foreclosure. His firm files more homeowners in the Mortgage Modification Mediation Program than any other law firm in Northeast Florida. Parker is the recipient of Jacksonville Area Legal Aid's prestigious Award for Outstanding Pro Bono Service. Mr. Parker is an active member of the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.
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