As the mortgage and foreclosure mess heats up across the nation, many large banks, under pressure from the Attorneys General in states like Texas and Delaware, are halting the foreclosure process. The reason for this freeze is that banks are unable to determine who actually owns a specific mortgage note. This resulted from the fact that many banks, starting from the original mortgage lending company, transferred the notes, via electronic means, to other lenders and banks, which eventually securitized the loans into what are known as Mortgage Backed Securities (MBS). The MBS were then diced, sliced and repackaged, and then resold to other financial institutions as investment vehicles.

The problem, of course, is that nowadays, no one knows exactly who owns what or who is responsible for paying who.

Today, millions of Americans have stopped paying their mortgage notes. Up until recently, many were already well within the foreclosure process, while others who were 90 days or so past due on payments were lining up during the delinquency process. According to a recent quarterly report from JP Morgan Chase, the average foreclosure process takes approximately 14 months, meaning that if you stop paying your loan today, you’d probably be able to remain in your home for upwards of one year before the foreclosure process was completed.

In many cases, however, foreclosures have reportedly been processed in error. In one widely reported instance, a homeowner was actually foreclosed on by two different banks who claimed ownership of the mortgage note! In many other cases, homeowners returned after a hard day of work only to find the locks on their doors changed and all of their belongings gone – and they had never missed a payment!

Errors are rampant in the mortgage market of today. To avoid becoming another mistaken foreclosure victim, we urge Texans, as well as all Americans, to take steps today to ensure that the bank which claims to own your mortgage note, as well as the mortgage service company collecting your monthly mortgage payments, are doing so under full legal authority.

Failing to do so may lead to credit problems down the road. Can you imagine having a foreclosure on your credit report, even though you made timely payments?

What You Should Do

Several web site have popped up that promise to generate a form letter that you can send to the mortgage/service company to verify the legitimacy of the mortgage note. While these web sites have good intentions, the letters which they generate are often lacking the necessary legal requests, and fall short of providing specific details of how to initiate the process with proper personal documentation of the process.

The following sample letter, provided by Foreclosure Detonator will ensure that you are requesting the proper information when contacting your lender.

This is a sample letter that acts as a Demand for your Mortgage Note and Service Agreement from the company that collects your monthly payments. It may need to be modified for your specific needs.

This letter will do several things which are very important to the initiation process:

  • Requests that the mortgage company provide you a copy of the mortgage note, for which they should have immediate access if they are the rightful owner/collector of payment on the mortgage
  • Requests that the mortgage company – if they are not the owner of the note but only service the monthly payments – provides a copy of the service agreement from the original note holder giving them the right to collect monthly payments on the note
  • Gives the mortgage company 30 days to respond – failure to do so will have legal ramifications for them
  • Requires that the mortgage company responds in writing, so a paper record(s) exists

The following letter should be sent to the bank to which you make your regular monthly mortgage payments.

Demand for your Mortgage Note and Service Agreement [SAMPLE LETTER]

To whom it may concern: I own the property at the address listed above, and your bank services my mortgage.

Over the last several weeks there have been many stories documenting the problem that banks are foreclosing on homes without proof that they own the loan.  I have learned that in many cases, banks like yours do not even know who owns the loans you service.  Employees at several leading banks have admitted to rubber stamping tens of thousands of foreclosures every month, without even checking to make sure that the bank had a legal right to proceed with foreclosure.  In some cases, banks allegedly falsified mortgage documents to cover up their mistakes.  There have been reports of two banks trying to foreclose on the same home, banks foreclosing on homeowners who were current on their payments, and even of a bank foreclosing on a home where the homeowner had never taken out a mortgage to begin with.  This is not merely a “technical problem”–it is the difference between having a warm bed at night and being out on the street.

As a homeowner and a customer of your bank, I am horrified.  I had always believed that it I played by the rules, I would be protected, but now I know that banks like yours think the rules don’t apply to them.

To protect myself and my family, I need to know who owns my mortgage.  Within thirty days, I would like to know the name, address, and phone number of the bank or investor that owns my mortgage.  Furthermore, in light of the recent allegations of foreclosure fraud, I demand to see the original mortgage note proving ownership over my home loan.  I would like to see copies of all endorsements and assignments of my mortgage note and where and when the assingment(s) _if any – were recorded.  I also ask that you provide me with evidence of your firm being contractually retained to service my loan.

If you fail to provide the information I am legally entitled to,  I will be forced to consider all options available to me to ensure that my family and my home are protected.

I ask that I receive my response in writing.

Thank you for your attention to this matter.

Important Note to Readers: As with all correspondence dealing with personal credit, loans, and credit collections, this letter should be sent using U.S. Postal Service Certified Mail With Return Receipt service. This will date stamp the letter at the time it was received, giving you a specific date from which to start the 30 day countdown. Failure to utilize CMRR service from the USPS may lead to problems later on if the bank denies having received your letter.

Following Up After 30 Days

Because a bank claims to be the rightful servicer of the mortgage loan, they must respond within 30 days. Failure to do so may have legal ramifications for them.

If the bank is unable to, for whatever reason, provide the necessary documentation proving that they are the rightful owner of the loan, you’ll need to contact an attorney for further action.

Though you may not end up “getting a free house,” you may very well be able to delay loan payments until the bank is able to sort out the paperwork – if ever. As mentioned above, the current foreclosure process takes in excess of one year to complete, suggesting that, if nothing else, you may be able to obtain interest-free deferred payments until the bank is able to provide you with the necessary paperwork.

Important Note to Readers: Do not stop paying your mortgage loan just because the bank has not responded or failed to respond with the appropriate documentation.

The remainder of this process will need to be handled through the proper legal channels and will require an attorney. If you need assistance with this, please contact us and we can put you in touch with an attorney who can help. Though you may need to retain an attorney with a payment, if the bank  has failed to meet their obligations, the payment to the attorney should offset your monthly mortgage payment. You may also be able to recover this payment via your lawsuit against the bank or mortgage company.

Whether you have failed to make mortgage payments, or are current on your monthly payments, taking a few minutes to generate a letter to the banking institution will ensure that your home does not get foreclosed on in error, or by the wrong institution. Taking steps to verify the legitimacy of your mortgage service company and bank can help to avoid significant headaches down the road.

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The sample letter has been provided by Foreclosure Detonator