One of the additional creative defenses to a foreclosure lawsuit that has surfaced in the past year is that of requesting the foreclosing bank to prove that it owns the mortgage note and has standing to sue the homeowners. Within the vast majority of foreclosure actions, banks don’t generate the original note, instead relying on the ignorance of homeowners not to challenge the bank’s positions.
But with the predatory lending and investing that went on throughout the boom years of the subprime mortgage market, many of these loans have already been sliced up and sold off piece by piece, packaged into mortgage-backed securities and sold to hedge funds, pension funds, along with other investors. In truth, the originating mortgage companies may well now be fully out of enterprise, with the collapse of the subprime business claiming more than 250 lenders so far.
So the loans were originated by a corporation which is now out of small business, after which it was sliced up and the rights to different parts with the mortgage were sold to other firms. But so as to sue for foreclosure, the bank initiating the lawsuit ought to have already been assigned the mortgage, and investors within the mortgage-backed securities aren’t even assigned ownership in a distinct property unless and until the homeowners fall behind on the payments. They have merely been bundled up into one massive pool of mortgages with no precise owners of any particular note.
Therefore, the businesses that invested in these mortgage securities were not parties towards the original transaction — they never participated directly inside the origination of the mortgage nor its subsequent sale. Investors are merely assigned to particular mortgages immediately after the reality, and there was no accurate sale of the security towards the investors, which is an element of a valid securities sale. Investors and banks, it seems, can not prove the own the mortgages, can not prove that they had been assigned a certain mortgage that they are now suffering damage from its default, and can not show that they even purchased a legitimate security.
And these are the firms that are presuming to sue homeowners for foreclosure! Soon after performing every little thing they could to induce individuals into fraudulent loans and limit their very own exposure to the inevitable defaults, banks are discovering that all of these shenanigans have only insulated them against actual ownership of the loan. So, simply because lenders rely on the ignorance of homeowners to foreclose anyway, this really is the defense they have turned to for the majority of foreclosure cases.
Numerous lenders are now submitting an affidavit to the courts that they don’t own the original loan but they swear they have standing to complain against the homeowners. Basically, they’re just requesting that the judge take it on their word that they can sue for foreclosure and are counting on homeowners not challenging this position. However, few homeowners read the foreclosure paperwork or hire an attorney to defend them, so they don’t understand just how shaky the bank’s lawsuit really is.
This is just one additional vitally essential reason that homeowners ought to read the paperwork they’re sent by their lenders and challenge everything that appears unfair to them. Especially if the mortgage company is claiming that they’ve the correct to sue but can not prove they have that appropriate, borrowers might wish to consult a contract attorney who can help them defend against the lender’s misconduct. Such a legal defense might only stop foreclosure for a brief period of time, however it is as much as the banks to prove homeowners really should shed their houses — not for homeowners to supplicate themselves in the feet of predatory banks and corrupt judges.