Requiring The Proper Paperwork To Initiate Foreclosure "A Nuisance ... A Gigantic Waste Of Time," Says Attorney

Bloomberg News ran a story last month on the difficulties foreclosing mortgage companies are facing by their inability to produce the mandatory paperwork in court when initiating a foreclosure action. The following excerpt caught my eye:

• Requiring banks to produce the paperwork at a foreclosure hearing is a nuisance, said Jeffrey Naimon, a partner in the Washington office of Buckley Kolar LLP. "It's a gigantic waste of time,'' Naimon said. "The mortgage may have transferred five, six, eight times. It's possible that you don't have all the pieces of paper, but it was enough to convince the next guy in the chain. There's no true controversy over whether the owner owns the loan.''

What needs to be pointed out to anyone harboring this belief is that the promissory notes being used in connection with institutional home mortgages are generally considered to be what the law refers to as "negotiable instruments." When the debtor on the negotiable instrument (known as the "maker" of the note) pays the loan off in full, the debtor is entitled to physically receive his note back from the creditor (known as the "holder" of the note), and the note is to be marked "canceled" by the creditor (Note: Simply receiving a satisfaction of mortgage, while enough to clear the lien from the title to the home, is not enough to actually cancel the debt evidenced by the note).

The reason that the actual note is to be returned to the debtor/maker is because if it isn't, the note remains out in the stream of commerce and if someone else gets their hands on the actual note, that person will be able to come forward and present it for payment, leaving the debtor/maker in a position of possibly having to pay twice on the same note (and having to go back and sue the first guy that he paid for a return of the money that was paid to him).

The point here is that how any attorney handling foreclosures on behalf of mortgage lenders can possibly believe that physically presenting the actual note for payment when initiating a foreclosure action to enforce payment is "a nuisance ... a gigantic waste of time" is beyond belief.

I suspect that in attorney Naimon's case, above, he was either misquoted or had his words taken out of context. I say this only because any attorney handling foreclosures for lenders who actually asserts the position expressed in the above excerpt is either clueless, willfully ignorant, or being intentionally deceptive as to what the requirements of law are in a mortgage foreclosure action.

For the article, 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.