Oklahoma Couple Beats Off Foreclosure As Lender Fails To Produce The Note, Prove Right To Collect

In Forest Park, Oklahoma, The Oklahoman reports:

• The Rev. Horace Scott for six years struggled to keep his house from being foreclosed on. Last week he learned he won’t lose his home. When it came down to it, no one could prove who actually owned what he thought was his.

• "In the old days, you got a loan to buy your house from a nearby bank,” explained Scott’s attorney, Roland Combs. The mortgage note, or the instrument of the debt containing the payment terms and details of it, stayed with the bank along with the mortgage that is signed by the borrower and is filed with the county clerk. The mortgage secures the debt obligation with the property.

• "Then, someone on Wall Street got the idea to use those notes as securities so they could be invested,” Combs said. "Notes were sold and combined and put into a pool to invest in by investors.” And sometimes, along the way, exactly what investor or bank has the original note becomes a mystery.

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• [L]ike so many mortgage notes pooled and used as investment vehicles, it wasn’t clear who held the original note or had a right to collect on the debt. Combs objected in court to Bank of New York’s claim that they had a connection to the Scotts’ debt because their name wasn’t on the mortgage or the note. On two occasions the bank didn’t respond to the objection. For this reason, a judge ruled the bank couldn’t collect. State law requires banks prove they have a mortgage and note together in order to foreclose on a home.

For the story, see Home loan confusion puts end to foreclosure of Oklahoma reverend (After housing bubble, toil and trouble, preacher wins).