5th Circuit: Original Note Not Needed To Foreclose Under Texas Law; Photocopy Of Original With Accompanying Affidavit Swearing It Is A True & Correct Copy Is Sufficient
Housing Wire reports:
- The U.S. Fifth Circuit Court of Appeals gave servicers foreclosing in Texas the green light to proceed with a foreclosure even when the servicer lacks possession of the note.
In a case called, Martins v. Bac Home Loan Servicing, the Fifth Circuit interpreted Texas law as granting servicers a right to foreclose without the note as long as they have a viable mortgage assignment.
- The argument made is that a servicer must posses both the note and mortgage assignment to obtain foreclosure rights. The process of banks recording multiple mortgage assignments through the Mortgage Electronic Registration Systems registry prompted many of these challenges.
The Fifth Circuit quashed this specific claim, holding the split-the-note theory "is inapplicable under Texas law where the foreclosing party is a mortgage servicer and the mortgage has been properly assigned." The court added, "the party to foreclose need not possess the note itself."
The decision also provided clarity on whether servicers are expected to produce the original note when trying to foreclose.
The court held production of the "original note" is not required in Texas as long as the servicer files a photocopy of the promissory note along with a supporting affidavit.(1)
For the ruling, see Martins v. Bac Home Loan Servicing, No. 12-20559 (5th Cir. June 26, 2013.
(1) On this point, the court said:
- In Texas, existence of a note may be established by "[a] photocopy of the promissory note, attached to an affidavit in which the affiant swears that the photocopy is a true and correct copy of the original note." Blankenship v. Robins, 899 S.W.2d 236, 238 (Tex. App.-Houston [14th Dist.] 1994, no writ). We find no contrary Texas authority requiring production of the "original" note. The original, signed note need not be produced in order to foreclose.
In Martins v. Bac Home Loan Servicing, supra, the homeowner apparently did little to nothing to attack the competency or sufficiency of the affidavit, or otherwise challenge the bankster's standing to foreclose in this case. From the court's ruling:
- Martins questions BAC's "standing" to foreclose. Martins presents an incoherent and rambling argument conflating ownership of a note with constitutional standing. Interpreting those arguments most charitably, we conclude that Martins contends that the note was not properly transferred to BAC and that the assignment was "robosigned" and therefore "forged." Because of that, Martins's logic goes, BAC was not the holder of the note, did not own the mortgage, and could not foreclose.
This argument fails. There is no doubt that the mortgage was transferred by MERS to BAC, which presented a signed, notarized assignment document that had also been recorded by the county clerk. Martins's allegations of forgery rest on the fact (based on counsel's research) that MERS does not have a Texas office and that the assignment was "robosigned." That alone is hardly sufficient to maintain a claim for fraud, much less to avoid summary judgment. BAC has offered sufficient evidence, through its recorded assignment, that it was the rightful holder of the mortgage, and Martins failed to present evidence creating a genuine issue of fact.