Legal Question in Real Estate Law in California

Re: Morgage

There is an urban myth of sorts floating around to the effect that if a lender cannot produce the original note, then it can't foreclose. To be completely honest, I have to say I don't know whether the "missing note" defense works in California, as I am nor aware of any actual case where this has been decided in a Court of Appeal. However, I think I can predict that the defense is a loser. A lender can post a bond to protect one and all against the eventuality that some third person will show up later on, validly in possession of the note. Further, can you imagine what the borrower will have to say when called as a witness at the judicial foreclosure trial?

Bank's Lawyer: Mr. Borrower, did you or did you not borrow $200,000 from XYZ Bank to buy your house?

Borrwer: No, I didn't borrow from them!

Bank's Lawyer: Well, then why did you write them a check marked "house payment" every month from 1994 until May, 2008 when you defaulted?

Borrower: uhh...umm.....well.....

Judge: Verdict for plaintiff!

So much other evidence will support the existence of the note and to whom the payments are due, including the recorded deed of trust, that there is no way a borrower can claim the bank isn't entitled to be paid without committing obvious perjury and getting jail time as well as a judgment of foreclosure.

Re: Morgage

Attorney Whipple is correct. While in Florida and Illinois there have been some successful defenses of foreclosures on the basis of the lender's inability to produce the original loan documents, that is specific to their law. In those states, as I understand it, all mortgage foreclosures are judicial, meaning that the lender must file a lawsuit to foreclose. The defense attorneys have been successful I think in most part because the law of those states DOES require the lender to produce original documents. Here, they do not have to do so. I've spoken with the attorney in Florida handling these "produce the note" defenses, and she is not aware of anyone in California who has been successful. Further, recent cases have indicated that the courts do not want to interfere with non-judicial foreclosures - the court's are taking the position that the non-judicial foreclosure is an exclusive remedy -the laws governing it are said to wholly occupy the area of law, and the Courts have no jurisdiction to interfere. There have been some reported cases where the courts dismissed attempts to stop foreclosure in California on this basis. Besides, Attorney Whipple's example is correct - can you honestly claim that you did not borrow the money? While this may give you some leverage to negotiate with the bank, its not the saving-grace people are making it out to be.

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