Because most of today’s mortgages are securitized, that is bundled together by the thousands in loan pools or trusts, questioning a bank’s right to foreclose, referred to as standing, is an important defense strategy for homeowners whose home is under assault. This is so since the securitization process loan involves transferring the mortgage among several different parties before it ends up in the pool. Often the transfer paperwork is slipshod or even non-existent, as it has been lost or destroyed.
THE PROMISSORY NOTE
When it comes to whether a foreclosing bank has standing, by far the most important document to be considered is the promissory note. In the case concerning our clients, the George’s, the Franklin County Court of Appeals focused on whether U.S. Bank, which brought the foreclosure case, and its loan servicer, Wells Fargo, had proven standing given the assignments (called endorsements), appearing of the Note, The Court found that they had not, and reversed the trial court’s award of foreclosure judgment.
CHAIN OF CUSTODY
Even more importantly, the George Court held that the Banks had failed to establish a chain of custody of the Note. The Court found that showing who had possession of the Note prior to U.S. Bank was essential to proving that the document that was claimed to be the original note was in fact the one and only original. This finding is extremely important and could have far-reaching consequences, as we believe it is extremely difficult for banks to prove chain of custody.
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Kathryn Eyster contributed to this article.