Your Money or Your House
Does the bank foreclosing on your home own your promissory note? This question was once ridiculous, but in the face of securitized debt and asset-backed securities, it is, sadly, very relevant.
Lenders and debt buyers were (and I hope this isn’t news to anyone at this point) greedy and made money hand over fist for a while by selling mortgages and then moving them into loan trusts and then getting investors to buy stock in the trust funds. When the cycle of greed started to lose its spokes, the trust funds started to foreclose in huge numbers.
But the evidence that the trusts own the mortgages is often weak, and is sometimes a sham. The trust’s lawyer shows up a foreclosure hearing with an affidavit from the trust fund. The affidavit says that the trust owns the borrower’s promissory note. That’s it. In this seemingly alternate universe, I could walk into court tomorrow and swear that you owe me $100,000. And the court would allow me to take your home to pay myself. That’s all it takes. That’s all the proof necessary, at least in the clerk’s offices and courtrooms of North Carolina, to take someone’s home.
Now, you might think (if you’ve been sleeping Rip Van Winkle style) that the trust would only foreclose if it knew that it owned the promissory note. But you’d be wrong. Foreclosure proceedings were recently initiated by two DIFFERENT entities against a Florida woman; both entities claim to own the promissory note. There are plenty of local examples as well, but none that I know of have links to press coverage yet.
No entity or person should be permitted to foreclose on a home unless it can prove that the borrower actually owes it money.