Something new, Something Blue, something Old: Go after them no matter what

From FAQ new entry:

> Comment:
> I meant to ask this question in my post…
> Our refinance in May 06 paid off the previous mortgage. I did not receive my original note back from my previous lender. I believe a lender is liable for any assigned loan, and I have read articles on lender liability in a refinance, My question is, if a lender does not send original note back to borrower, is that contract in affect still open to rescind? even though someone has paid that amount on my behalf? But if the lender does not take the required steps in paying off this loan in a refinance why would they not be responsible? Is the lender with whom we have refinanced liable for paying a loan that has discrepancies in the paperwork, or when the bank they paid off did not follow through in their returning the original note to borrower? What documentation is exchanged between banks when a loan is paid off?
> Can this lender be responsible for this paid off amount as part of my law suit, thus leaving us not in debt for the amount that was paid by them? There are many complicated issues with this case. This has made it hard for the attorneys. I have sent a link to your site to my attorney. Thank you.

ANSWER: A very interesting question. Let me re-phrase it slightly. Up till now we have been concentrating in this blog on current mortgages that are in default, delinquency, the process of sale or the process of eviction. There are two major other classifications that need to be addressed:

1. Homes that are encumbered by mortgages where predatory lending, TILA violations, RESPA violations, HOEPA violations, RICO violations, fraud, usury, appraisal fraud and/or other issues are present like affordability and failure to employ reasonable underwriting standards, BUT where the the homeowner is not in default, has payments current, etc. They know they were screwed, but they have the income to pay for it. What about them?
2. Homes that were sold and where the 1sts Mortgage holder was paid off and the second mortgage holder was paid off etc.

In both cases the same issues apply as to any home that is in distress. You can and should challenge the validity of the authority of the mortgage servicer, the note and the mortgage in both cases. You should ask to see a copy of the note and in the case where it was “paid off”, you should have received the note marked “canceled” and signed by an AUTHORIZED person. It is doubtful that very many people actually received their canceled note in the closing of the sale of their home and doubtful that your current mortgage lender has physical possession or ownership of the note or its underlying obligation to pay. Therefore it is probable that the people you dealt with when you sold your house or the people you are currently dealing with lack authority or didn’t have the authority to cancel the note and deliver it.

So what I am saying is that people who are not in financial distress but either had or recently paid off one of these loans have nothing to lose by going after them. In the case of property where the mortgage(s) was paid off, I would demand a refund unless they can produce proof that they were entitled to the money. In the case where you just have a mortgage that you think they were predatory etc., demand a rescission (get an audit first), demand damages, refunds, rebates, treble damages etc.

> Date: Wed, 17 Sep 2008 18:22:43 +0000
> To:
> From:
> Subject: [Livinglies’s Weblog] Comment: “Foreclosure Offense: Quiet Title and Rescission (TILA and otherwise)”

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