Its still a problem. Lenders trying to foreclosure must prove they have the ability to foreclose. They must have the rights to foreclose. But who really is the lender and has these rights?
Generally, only the party in possession of the underlying note referencing the deed of trust has the right to foreclose. In California, a mortgage on a home originates from two items: Deed of Trust and Note. The Deed of Trust is filed with the County Recorder for all to see that a lien exists on the home. Filing with the County Recorder prevents the lien from being removed from the property. But unless there is also a Note, the Deed of Trust is unenforceable.
California Law has long held that a Deed of Trust without an underlying Note is a “Legal Nullity.” So if someone loans you money and you execute a Deed of Trust, but no accompanying Note, they have no right to foreclose on the property. But what happens when the Deed of Trust and Note are executed, then sold, and then the Note can no longer be found?
Consider the Note like a Check. Instead of looking like a bank draft, its generally about 4 pages long. But like a check, you need possession of it if you want to cash it. Can any of you cash a copy of a check? NO! Same with a Note. You need the original or its useless. So while a Deed of Trust and Note can be sold, the underlying Note must always be transferred in the sale. When a lender sells its mortgages from one to another, it must transfer the Note. If not, its a problem!
Under California Law, Ca Com Code 3301, there are only 3 ways to enforce the note to allow foreclosure. The foreclosing party needs 1) the note endorsed to them and in their possession, 2) the note in their possession and some other assignment or rights allowing them rights under the note, or 3) Lost Note Affidavit (possession of the note, which was later lost,) and rights under the note/assignment.
If you dont have any of these three, the law simply states YOU CANT ENFORCE THE NOTE! Go home, your done, bye bye. Anyways, its beginning to be a problem. Bloomberg contacted me first hand to discuss this and so I had a few words to say.
Written by Michael Doan– Michael Doan is a member of the Doan Law Firm, which consists of Chula Vista Bankruptcy Attorney locations, Escondido Bankruptcy Attorney locations, La Mesa Bankruptcy Attorney locations, and San Diego Bankruptcy Attorney locations…just to name a few. Presently, Michael is concentrating his practice solely in Bankruptcy Law and is a Board Certified Specialist in Consumer Bankruptcy Law by the American Board of Certification, one of only fourteen such attorneys in all of California. He also owns and manages the Carlsbad Bankruptcy Attorney Office.
Are you in need of an Oceanside Bankruptcy Attorney? Look no further, contact a professional who is here to help you today!