The stratedy is called Prove-The-Note. I wrote about this last March and it may be even more common now. Banks sell loans to other banks, plus in the last two years 300+ banks have either closed or been bought, and those original notes were lost in the transfer process leaving them on shaky legal ground.
If the original note that gave you the house and the bank the mortgage rights is not to be found then it is up to judge to say whether they have the authority to foreclose. In my post last year the guy had lived in his house payment free for years.
“This is an army of lawyers getting out there to stop foreclosures so we can get to the serious business of creating solutions,” Charney said. “Nothing good is going to happen as long as we continue to bleed homeowners.”
Democratic Rep. Marcy Kaptur of Ohio endorsed the strategy in a fiery speech on the House floor during debate on the federal bank bailout last month.
There are two real benefits to this strategy besides living in a home for free according to the article.
- This may cause the bank to be more flexible in negotiating a loan modification. Though it would seem that if you are arguing they don’t have the right to foreclosure they may not be so forthcoming in a modification.
- Bide some time to get back on your feet, though if you are getting too far behind it may be too late to catch up.
I haven’t met anyone who has invoked this strategy yet nor a lawyer who does it but I think it will be soon that we will see someone try it.
Photo via http://www.flickr.com/photos/makelessnoise
