Legal News

Lender can't prove mortgage exists

By Glen Ashman

A federal bankruptcy judge in New York created new uncertainties for mortgage servicers when he expunged a mortgage debt after the servicer could not provide sufficient documentation that it had a claim on the home.  The ruling came earlier this month in bankruptcy court in the Southern District of New York in a case involving Mount Laurel, New Jersey-based PHH Mortgage and a property in White Plains...Judge Robert Drain wiped out a $461,263 mortgage debt on the property, in another case of how things can go wrong when documentation does not keep up with transfers of mortgages in a world of securitized loans. A recent ruling by the Kansas Supreme Court similarly denied the Mortgage Electronic Registration Service (MERS) rights to recovery in a foreclosure case, even though MERS often stands in for banks that actually hold the mortgage. As a consequence, the bank holding the mortgage lost out in the foreclosure...In the hearing, the PHH lawyer argued that in the secondary market, there are many cases where assignment of mortgages or assignment of notes don?t happen at the time they should ? that this was standard operating procedure for many years... Judge Drain rejected that argument

http://www.dsnews.com/articles/bankruptcy-court-wipes-out-mortgage-debt-when-servicer-fails-to-document-claim-2009-10-26

Full post as published by It's (Barely) Legal on October 26, 2009 (boomark / email).