There are many strategies to stall or stop foreclosure proceedings, but one of the fastest growing methods is known as “Produce the Note.”

Overview

The basic idea is rather simple.  In order for foreclosure to proceed, the lender who is foreclosing must prove that they are the ones who own the loan.  Proof is established by the lender producing the mortgage note, which is the original piece of paper you signed at closing.  This strategy may stall foreclosure because the original note may be difficult (or impossible) to find.

One side effect of the housing bubble was the repeated selling of mortgage notes.  Many notes were sliced up, combined with others and resold.  All of these transactions make finding the original note very difficult.  A University of Iowa study reported that in 40% of the bankruptcy cases caused by foreclosure they analyzed, the original note was not found.  Had the homeowners requested that the note be produced, the foreclosure may have been delayed.  Without proof of loan ownership, the judge may throw out the foreclosure proceedings until the lender locates the necessary paperwork.

The original note is usually found, and some judges may allow proceedings to continue with lesser documentation, but for people with no other options, requesting that lenders produce the note is worth a shot.  The request will likely stall forclosure, at least temporarily, and may give them the time you need to settle the debt and remain in their home.  In some cases, a little more time is all that is needed to avoid foreclosure entirely.

Fallout

While you can’t blame people for employing this method, the simplicity and rising use are cause for concern.  I tried to present the overview in the light in which it is normally presented to homeowners facing foreclosure.  Note that the pitch didn’t start with a caveat like, “If you lost you job, became disabled, or some other event beyond your control is forcing you towards foreclosure and a slight delay could save your house, try this method.”  Rather it’s seen as a blanket tactic for everyone facing foreclosure, regardless of whose fault.  A large percentage of homeowners are facing foreclosure simply because they bought way more house than they could afford.  Even people facing layoffs shouldn’t get too much sympathy if they’ve been living beyonds their means and have nothing in the way of an emergency fund.  There are certainly foreclosure situations that do deserve sympathy, but I fear that the majority do not.  Rather than promoting a blanket tactic to delay all foreclosures, I would prefer that Produce the Note requests would only be used in those truly sympathetic cases.  In the rest, I would urge an alternative strategy: homeowners taking personal responsibility for their own poor choices and the consequences that occur as a result.