Academic journal article ABA Banking Journal

Foreclosing Foreclosure? They're Delinquent, but You're on the Hot Seat

Academic journal article ABA Banking Journal

Foreclosing Foreclosure? They're Delinquent, but You're on the Hot Seat

Article excerpt

One casualty of the current economic downturn has been the ability to move a default on a mortgage through the foreclosure process. Once a fairly routine procedure, legal challenges to what would have been routine foreclosures have exposed weaknesses in the process that may, at least temporarily, prompt a return to the time-honored practice of recording assignments and transfers at the county court house.

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Now more than ever, a bank that is seeking to judicially foreclose on a mortgage must have its paperwork in order before it proceeds. The strategy developed by legal counsel handling cases on behalf of homeowners is relatively simple: challenge everything, including the authenticity of the documents used to establish the chain of ownership of the mortgage and note. The delinquency itself is often not at issue; instead, the thrust of the proceeding shifts to whether the bank (or its nominee) can establish the bona tides of the documents that it sets before the court in support of its petition for foreclosure. This frequently includes such previously-overlooked details as whether the signatory had actual authority to execute the document, whether they actually read the document and confirmed the facts before signing it, all the way down to whether a notary witnessed the act of signing the supporting affidavits.

In normal circumstances, this type of scorched-earth approach to litigation would risk the ire of the court as being unnecessary and a waste of the court's time and resources, especially when the borrower does not contest the delinquency. …

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