You would probably think it insane if I were to tell you that your bank might not have any legal right to collect on your mortgage or threaten foreclosure. The truth is, the chances of your bank being unable to prove your debt is more in your favor than you would ever believe.A recent research paper published in the Texas Law Review* provides some disturbing facts regarding bad banking practices. A study of 1,700 bankruptcy cases proved; banks cannot produce the note 41% of the time and they cannot produce a security instrument 19% of the time. The results further indicate that one or more pieces of required documentation is missing 52% of the time.
Simply put, your bank is required by law to have the proper paperwork to prove how much you owe, who has the legal right to collect the debt, and if the debt is securitized by a Deed of Trust or other lien on your property.
What does all this mean to people having trouble with their bank, filing bankruptcy, or facing foreclosure? If the bank does not have a legal lien on your property, then it is NOT a mortgage loan, it is a personal debt and they CANNOT take your property by foreclosure. If the bank does not have the note, there is no accurate way to determine how much you owe and if they are the entity legally entitled to collect the debt.
Unfortunately, many attorneys and judges do not know, or follow, the consumer credit laws and many claims against the consumer go uncontested. Don't let this happen to you, demand the proof from the bank that they have the legal right to collect the debt.
*Misbehavior and Mistake in Bankruptcy Mortgage Claims by Katherine Porter, Associate Professor University of Iowa College of Law, BA, Yale University, cum laude, 1996, JD, Harvard Law School, magna cum laude, 2001
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