Homeowners Facing Foreclosure Demand Proof of Mortgage Ownership

As Florida foreclosures continue to soar, homeowners have found a way to delay lenders from taking over their distressed properties: proof of mortgage ownership.

During the peak period of the real estate market, most of the mortgage loans were either bundled into securities or sold to investors. Along the course of selling and reselling mortgages, the original documents signed by homeowners were lost, stored in a warehouse or destroyed.

By convincing judges to oblige lenders to produce proof of mortgage ownership, distressed homeowners have delayed foreclosures. This also gives them time to renegotiate their mortgages with lenders.

But still, despite this strategy, Florida foreclosures continue to rise without any sign of letting up. In 2008, over 2.3 million borrowers were in some kind of foreclosure proceeding.

Tampa-based lawyer Chris Hoyer said that the only way to fight foreclosure is for homeowners to stay put in their properties. He pointed out that no relief is given to a homeowner who has already lost his property to foreclosure.

Hoyer offers for free the court documents used by homeowners to file their request for lenders to show proof of mortgage ownership on his Web site, Consumer Warning Network. He is instrumental in promoting the use of the strategy to delay lenders from taking over a property.

Meanwhile, American Securitization Forum deputy executive director Tom Deutsch has dismissed the delaying tactic, pointing out that homeowners are just postponing the inevitable.

He explained that the original mortgage note is electronically stored and can be found eventually. In some cases, judges accept electronic documentation or allow lenders to present other documents that show that they are the rightful holder of the mortgage loan.

But still, it takes time for lenders to assemble the necessary ownership document which is advantageous for the distressed homeowner.

A 2008 study by the University of Iowa showed that mortgage servicers, most often than not, were neglectful in their storage of original documents that will support foreclosure. The study showed that out of the 1,700 cases of bankruptcy due to home foreclosures, 40 percent have missing original mortgage notes and other required documents.

The delaying strategy came into the public’s attention two years ago when a Cleveland, Ohio federal judge dismissed 14 foreclosure cases filed by Deutsche Bank National Trust Co. due to the bank’s failure to present the original mortgage notes.

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