When you buy a home, there is a litany of paperwork you must sign. From inspection reports to loan documents, it can seem like an endless sea of contracts. One important document that's part of obtaining financing for a home is the promissory note. This is different from the mortgage in that it is the actual document that outlines your promise to repay the money you've borrowed.
Only the owner of the promissory note has the right to enforce it. Without that note, a party cannot demonstrate that it has any right to be repaid. This becomes especially important in foreclosure cases.
Although it may seem obvious that a bank from which you borrowed the loan would hold the note, it's often much more complicated than that. In many cases, the original bank does not retain possession of a loan for the entire repayment period. Instead, it is sold to different investors, who then take over the loan. All of the important paperwork typically goes with that sale, but occasionally the new owner of the loan will not receive the promissory note at all.
Because a promissory note is required to enforce a loan, this can spell trouble for a bank attempting to foreclose without one. However, the homeowner must raise this as an issue to require that the loan holder prove it has the right to foreclose. In other words, if you're facing this situation, you should demand that the foreclosing party produce the note, as a court will not independently examine the issue if you don't raise it. Once you do, it shifts the burden onto the loan holder to prove it holds the promissory note. If it cannot produce the document, it does not have the right to proceed.
The "produce the note" defense is a strong one, but it's not ironclad. To learn more about how you can defend against a foreclosure claim, speak with a knowledgeable New York attorney at Rubin & Licatesi, P.C. by calling 516-227-2662 or contacting us online.