From: Mario Kenny’s WordPress Blogsite
October 25, 2009
I am an attorney who has taken “produce the note” one step further. I am current on my mortgage, and actually what prompted me to take
the action I am taking is that I had paid off my second mortgage but my
lender refused to surrender my paid off second mortgage note. My lender
also refused to prove to me that it had my first mortgage note or that
it had the authority to make payment demands.
So I decided to sue my lender.
I decided that if the “produce the note” strategy was working for
people who were in default, it would work for those who are not in
default. If the bank doesn’t have the right to foreclose, it doesn’t
have the right to demand payment either.
The Uniform Commercial Code is the homeowner’s best friend.
UCC 3-501 requires a lender to “exhibit the note” when the lender
makes demand for payment, and the borrower demands to see the note.
Technically a demand for payment occurs every month, and it also occurs
when a bank begins foreclosure proceedings.
UCC 3-501 also requires a servicer to show authority to make a
demand for payment, if it does not own the note, but is merely
servicing it. In the event a noteholder or servicer or will not exhibit
the note or perform other legal requirements when requested to do so by
the borrower, this UCC section allows the borrower to discontinue
payments WITHOUT DISHONOR until such time as the noteholder or servicer
complies with all laws or contract provisions.
Also helpful is UCC 3-309. UCC 3-309 requires the lender go through
certain steps to prove up a note (make it enforceable) that is lost or
destroyed. This is not easy for the lender to do, if one is willing to
contest everything the lender does to try to prove up the note. This
proof takes witnesses, who may not be able to say what the law
requires, if the witnesses are thoroughly cross-examined. (Tip: Don’t
let the lender get by with self-serving affidavits; take their
witnesses’ depositions). Moreover, this section requires the lender to
give adequate protection in the event the lender can make the lost note
enforceable. That may be difficult for a lender that is under FDIC
scrutiny and whose stock is in the tank.
I filed suit in March and so far my lender has vigorously put off
answering my suit with what I believe was a meritless motion to
dismiss, but has not yet produced either note, and has confirmed my
unpaid note was sold to Fannie Mae. This is clearly a justiciable
controversy as will be clear when I ask the court to allow me to put my
future payments into the registry of the court until the note is proven
up and authority to make demand is proven.
If the bank really believed it had the evidence to compel me to pay,
it would have gladly produced the note by now with proof of authority
to demand payment. They have steadfastly avoided having to do this.
Chances are the note is lost or destroyed.
It gets even better. MERS is the sole beneficiary of my Deed of
Trust (quite often the case for homeowners on Deeds of Trust since
2000). The Arkansas Supreme Court has just ruled in March of this year
that MERS was not the beneficiary of a Deed of Trust (with language
verbatim to mine) despite what the Deed of Trust said, because MERS has
no interest in the note payments or in the corpus of the trust
(homeowner’s obligation to pay). No beneficiary means the Deed of Trust
is fatally flawed.
More and more it is looking like I will have the lien on my home
removed and I may well never have a noteholder to pay. I could even get
some of my money back.