More smart tips from Alex Speak: True or false? If your lender loses their copy of original note on your loan, they cannot foreclose. The answer is FALSE! That’s a myth, most of the time.
For the lender, the note is the most important paper you sign at a real estate closing. Why? Because if you don’t make your loan payments, the lender can’t foreclose without it. What? Did I just say it’s a myth? Yep, I did. So let me explain..
The basic rule is that a lender can’t foreclose without the note, but there are exceptions to the rule. The law allows a lender who’s lost the note to foreclose in two situations.
The first way is if the lender can re-establish the note; then it can foreclose. Re-establishing a lost note consists of the following: The lender must prove the time of and manner in which the note was lost, plus.. the lender has to prove all of the terms of the note, including the amount of the loan, the length of the loan, the amount of the interest rate, the type of interest rate (fixed or adjustable, etc.).).
More times than not, it’s going to be impossible for the lender to prove both the time and manner in which it lost the note. In order to prove all of the terms of the note, the lender has to have a copy of the original signed note. Re-establishing the note, then, can be a tough road for the lender to travel down.
The second way, is for the lender to ask the court to enforce the lost note. This is easier for the lender to do because the lender doesn’t have to first re-establish it. All the lender has to do is show that the note was lost. They do this by saying it was lost; they don’t have to prove the time of and manner in which it was lost. To prove the terms of the note they have to show they have a copy of the original signed note.
It comes down to this: If the lender loses the note, but doesn’t have a complete copy of it, they haven’t a chance of foreclosing. If they do have a complete copy of the original signed note, then they can proceed with the foreclosure.
Tags: foreclosure info, foreclosure legal help, loan modification, loan modifications, missing loan note, mortgage help, original loan note, real estate news