Lost Note Affidavits: Are Foreclosing Lenders Really Losing All These Homeowner Promissory Notes?

In a Bloomberg News article last month featuring Boca Raton, Florida resident Joe Lents, who reportedly hasn't made a payment on his $1.5 million mortgage since 2002 because the lender's inability to produce Mr. Lents' promissory note has precluded a foreclosure of Lents' home, the apparently common (and possibly illegal and/or unethical) practice by foreclosing lenders and their attorneys of submitting "lost note affidavits" in foreclosure actions as a substitute for a promissory note that can't be produced was raised in these excerpts:

• When the mortgage servicers and securitizing banks that act as trustees of the securities fail to present proof that they own a mortgage, they sometimes file what's called a lost-note affidavit, said April Charney, a lawyer at Jacksonville Area Legal Aid in Florida. Nobody knows how widespread the use of lost-note affidavits are, Charney said. She's had foreclosure proceedings for 300 clients dismissed or postponed in the past year, with about 80 percent of them involving lost-note affidavits, she said. "They raise the issue of whether the trusts own the loans at all,'' Charney said. "Lost-note affidavits are pattern and practice in the industry. They are not exceptions. They are the rule.''

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• "If the homeowner doesn't object to the lost-note affidavit, the judge rubber-stamps it,'' Lents said. "Is it oversight, or are they trying to get around the law?''

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• [Mortgage Electronic Registration Systems] rules don't allow [its] members to submit lost-note affidavits in place of mortgage notes, [MERS CEO R.K.] Arnold said. "A lot of companies say the note is lost when it's highly unlikely the note is lost,'' Arnold said. "Saying a note is lost when it's not really lost is wrong.''

• Lents's attorney, Jane Raskin of Raskin & Raskin in Miami, said she has no idea who owns Lents's mortgage note. "Something is wrong if you start from what I think is the reasonable assumption that these banks are not losing all of these notes,'' Raskin said. "As an officer of the court, I find it troubling that they've been going in and saying we lost the note, and because nobody is challenging it, the foreclosures are pushed through the system.''

For the story, see Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish.

For a related post, see Foreclosure Legal Work: A Shoddy, Assembly-Line Practice?

For other posts that reference the sloppiness and carelessness of some mortgage lenders and their attorneys in the physical handling of the mortgage loan documents when bringing foreclosure actions, see:

• Missing Loan Documents Stall Mortgage Foreclosure, and
• Foreclosures Stalled By Missing Loan Documents.

Editor's Note:

I have yet to find any published reports on class action lawsuits or administrative disciplinary actions by state bar associations being brought against mortgage companies' attorneys who are filing lost note affidavits in foreclosure actions as a matter of practice and without regard to whether the promissory note has actually been lost or not. If anyone comes across a story about such a class action or state bar association disciplinary action, please forward me the story or a link - HomeEquityTheft@yahoo.com.