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"Show Me The Note"

Finn: Sol

A Foreclosure Defense that Works

I’m not going to hide the fact that this information comes from personal experience and need.  When I made mortgage payments to Chase Home Finance, LLC, it claimed ownership of my mortgage note, also known as a deed of trust, note, or ‘loan’ note (hereafter “Note”).  During the same time period that Chase claimed ownership of my Note, so did Fannie Mae.  However, I soon discovered that neither Chase nor Fannie Mae owned my Note.  It was, and still is, owned by a mortgage backed security trust (MBST) which purchased my Note from neither Chase nor Fannie Mae but from yet another purported owner of my Note.   In my extended diary I give the UCC statute common to all states and also recent case citations (one is less than two weeks old) that you, your attorney, or your friend’s attorney will need for a successful “show me the note” defense.  Yes! It works!

You need to know this; that the term, “show me the note” is a misnomer.  Under the Uniform Commercial Code (UCC), Section 309 of Article 3 (UCC 3:309)…  the Note owner does not need to show a Note, whether original or a copy, in order to enforce it “if” it once had possession of the Note and now claims to have lost it or that it was accidently destroyed.  That, however, is not the problem that banks face.  The problem banks are having with the “show me the note” defense is proving that they have a right to enforce the Note, even if they can produce a copy.   The UCC, at 3:309(2), says that the bank must ‘prove’ its right to enforce the Note.  You ask the bank, “Where did you get that Note?  Show me the endorsements”.  The bank must show the ‘chain of title’ from the original Lender bank to itself, and that it cannot do.  Almost always, the Lender sold your Note to Fannie Mae the day it was signed which then, within days, sold it to another entity and so on until it ended up in a “mortgage backed security trust”, or MBST.  Fannie Mae no longer owns your Note, nor does MERS.

The United States Bankruptcy Court for the Eastern District of California issued a ruling dated May 20, 2010, in the matter of In re: Walker, Case No. 10-21656-E-11,… stating that “Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.”  Though this conclusion was based upon California law it is the same UCC and real estate law as most other states have adopted.  The In re: Walker court states that the Note and the mortgage are inseparable, and that an assignment of the Note carries the mortgage with it, “while an assignment of the latter [the mortgage] alone is a nullity” (most foreclosing companies claim ownership of the mortgage only, not the note making the mortgage a nullity).   Meaning; if a bank claims to own the mortgage but doesn’t also own your Note, it cannot foreclose.  This concept is from ancient English Common Law codified by most states as the UCC, for Notes (a Note is personal property), and also from real estate law and practice for the mortgage (a mortgage is not personal property, it is real property).

A more recent California case, Gomes v Countrywide Home Loans, et al., D057005, Ct. Appeals CA, 4th Dist., Div. One, February 18, 2011,… did not address the “show me the note” defense though it was widely expected to do so.  However, in Gomes the CA court cited two cases approvingly where the “show me the note” defense was accepted by federal courts; Castro v Executive Trustee Services, LLC, (D Ariz, 2009 February 23, 2009, CV-08-2156-PHX-LOA) 2009 US Dist. Lexus 14134,…  and Weingartner v Chase Home Finance, LLC, (D Nev 2010) 702 F Supp2nd 1276, 1282-1283,… .

The CA court noted that the issue in those two cases cited in the preceding paragraph (the “show me the note” issue) was not the same issue that it had to decide in Gomes.  In the Gomes case the plaintiff, Jose Gomes, did not raise the “show me the note” defense.  Instead, his case was a lawsuit for discovery in order to find out ‘if’ he could raise the “show me the note” defense.  The Gomes court held that such a lawsuit, making ‘no’ specific allegations, did not state a cause of action as a matter of law.  Gomes alleged only that ‘upon information and belief’ MERS did not own his Note or did not have authority from the Note owner to foreclose and Jose Gomes wanted to know if his “information and belief” was true, because he didn’t really know if it was true.  The Gomes court, finding that Gomes made no allegation upon which it could rule, agreed with the lower court that his case should be dismissed.  The Gomes court never addressed the “show me the note” defense in its published opinion.

The most recent case that expounds upon the “show me the note” defense, as does Weingartner, continues with the reasoning made in previous court rulings made in Kansas, Ohio and Michigan and other states making ownership of your Note a requirement in order to commence a foreclosure, whether in a judicial or non-judicial state.  See, Eastern District Bankruptcy Court for New York, In Re: Ferrell L. Agard, Case No. 810-77338, February 10, 2011 issued less than two weeks ago, In this case Ferrell Agard, the homeowner, lost for reasons having nothing to do with ownership of the mortgage Note, but the Hon. Robert E. Grossman, Bankruptcy Judge, stated, “However, in all future cases which involve MERS, the moving party must show that it validly holds both the mortgage and the underlying note in order to prove standing before this Court”.  In other words, Mr. Banker, if you want to foreclose, or file a Proof of Claim and set aside the ‘stay’ order that stops you from foreclosing, you must “Prove” that you own “both” the mortgage (deed of trust) and the note (meaning: prove a valid “chain of title”).  So, my friends, the “show me the note” foreclosure defense gains in strength with every court decision.  Spread the word.