Produce the Note (Foreclosure option)

If you are Homeowners in the foreclosure crisis, there may be a legal loophole to help you.

If you are in the foreclosure process, a legal loophole called "Produce the Note" (helps slow down the foreclosures process) may allow you to stay in your home longer. You can confront your lender (or companies) that are threatening foreclosure and demand they provide you an original copy of your note or mortgage. You may actually have a leg to stand on. During the lending craze, thousand of mortgages were sold to investors (Lenders typically sell off their notes in bundles to Wall Street and other investment groups or private investors) and sometimes the loan information would be lost in the shuffle, therefore, requesting the note on your property; the lender cannot proceed with the foreclosure process. Once the notice is filed, the lender must produce the note. The company that's trying to foreclose actually has no legal right to do so without the original paperwork.

During the lending boom, most mortgages were flipped and sold to another lender or servicer or sliced up and sold to investors as securitized packages on Wall Street. In the rush to turn these over as fast as possible to make the most money, many of the new lenders did not get the proper paperwork to show they own the note and mortgage. This is the key to the produce the note strategy. Now, many lenders are moving to foreclose on homeowners, resulting in part from problems they created, and don´t have the proper paperwork to prove they have a right to foreclose.

This isn´t the solution, only a possible preventative measure that can give you a little more time to stall the foreclosure process. About 40% of the loan documents cannot be found easily, however, if you are in the 60% category, the lender will produce the loan documents for you. Loopholes like this one will simply delay the inevitable, the tactic is a feasible way to stall the foreclosure, but won't work for everyone, therefore, you need to work closely with your lender or a HUD-certified agency to see if you qualify for a loan modification program.

In some states, a lender can foreclose on your property without going to court. These are called non-judicial foreclosure states. You can still use the "Produce the Note" strategy in these states, but it takes a few more steps on your part.

The concept behind "Produce the Note" is when a homeowner is faced with a foreclosure suit, "Produce the Note" requires the lender to prove it has the actual authority to foreclose, by requiring it to officially produce the original promissory note in the lawsuit. But if there is no foreclosure lawsuit, what can homeowners do? In these "nonjudicial foreclosure" states, such as California, Texas, or the thirty or more other states with similar procedures, the homeowner has to file a lawsuit against the party trying to foreclose.

Here´s how it generally works:

In a state with nonjudicial foreclosure procedures, the lender can initiate a foreclosure sale without using court proceedings.

Homeowners receive a "Notice of Intent" letter informing them that a foreclosure sale will be scheduled unless the overdue debt is paid within a certain amount of time.

If the debt is not paid accordingly, a "Notice of Sale" is then sent informing the homeowner that a foreclosure sale will take place at a particular time and place.

No lawsuit is ever initiated by the lender and the courts are not involved.

Without a lawsuit, you cannot use judicial procedures to require the lender to "produce the note."

Merely sending a private letter to the lender "demanding" that it produce the original note to the borrower may be met with utter disregard or outright refusal by the lender.

So, here´s what you can do:

In a nonjudicial foreclosure state, in order to protect yourself by demanding that the lender "produce the note," it will be necessary for you to first actually file your own lawsuit. Even in such nonjudicial foreclosure states, no law prohibits you from instituting your own lawsuit challenging the right of a lender to foreclose on your property. The lawsuit would allege that:

1. The lender has sent a Notice of Intent to Foreclose;

2. The homeowner is unsure as to whether the lender still possesses the original debt instrument, upon which the lender claims the right to foreclose;

3. The homeowner wants proof of such authority; and

4. The court should intervene and prevent the foreclosure from taking place unless and until such proof is presented.

Initiating litigation to protect your rights is never a simple process. Requirements as to what must be contained in a pleading, how the facts must be plead, who should be named in the pleading, and how the pleading should be officially "served" on the lender, all differ from state to state.

Once a lawsuit is initiated, however, all states have judicial procedures that allow a party to require the other side to produce relevant documents, and the "produce the note" strategy can be used.

Often times, the best way to protect your rights in these situations is to seek professional help from an attorney licensed to practice in your geographical area. Getting involved in a lawsuit by representing yourself, especially if you file the lawsuit yourself, is not easy, but you can do it. Every citizen is able to represent himself or herself and file a lawsuit on their own. It´s called pro se, which means, "On ones own behalf."

If you can afford a lawyer, then by all means, hire one. There are attorneys who specialize in real estate matters, and either advertise or can be found in the yellow pages. Most areas have bar associations that maintain lists of attorneys willing to help in specific areas of the law.

Finally, there is usually "legal aid" organizations around set up to assist individuals who may have difficulty paying for the services of an attorney. A good place to begin your search is by going to the Legal Services Corporation website.

So, even if you are in a non-judicial foreclosure state, you can use "Produce the Note." This is your home, and if you want to fight for it, you do have a way.

Using the "produce the note" strategy is something all homeowners facing foreclosure can do. If you believe you´ve been treated unfairly, fight back. We have created templates for a legal request, a letter to your lender and a motion to compel to help you through the process.

The three documents usually associated with the Produce the Note are:

1. Request for Production of Document

2. Defendant´s Motion to Compel

3. Letter to lender request for a copy of the Promissory Note

Notwithstanding, "Always" seek legal or professional advise in real estate matters.