Wednesday, January 21, 2009


You ask yourself this question and maybe, just maybe there is some light at the end of the tunnel. Just passing on some thoughts heard around the water cooler. If you or a friend is facing foreclosure, you no doubt can find in the foreclosure action a petition from the plaintiffs (lender) attorney asking the court to "accept a lost note or document affidavit". Now this statement in itself shouldn't cause any dynamite to blow up but if you look into the actual reason for this simple little petition, you will be amazed at what might be happening right before your eyes, in front of the Judge and the entire world.
You see, almost ninety-nine percent (99%) of the average citizens do not have a clue about how the real money is made in the mortgage business. In fact, I would venture to say that over seventy-five percent (75%) of today's mortgage brokers don't have a clue about how money is made in the mortgage business.
You will see ads in all of the mortgage magazines "looking for sharp loan officers" commissions up to one hundred percent (100%). Now, think about this just for a minute. IF a mortgage company was going to pay out one hundred percent (100%) commissions, how do they make any money? Confused? Join the crowd. Here is how they make their money and I mean really, really big money.
Let's just say that ABC Mortgage Company has ten loan officers and each one creates two (2) mortgages a month. ABC now has twenty mortgages at an average of two-hundred thousand dollars ($200,000) on the table and they have paid out ALL of the commissions earned from the lenders to the loan officers. DUMB? Nah, just read further on. For many years international investors would buy US Mortgage Notes because they were looked at as one of the most secured investments in the entire world. So, these groups of which might be Honda, Yamaha, Toyota and other financial giants would diversify their investment portfolios with secured US Mortgage Notes. For the mortgage company like ABC that had twenty loans a month and you thought they were not making any money, look at what happens.
The secondary market buys those twenty mortgage notes from the mortgage company at the closing or soon thereafter. They pay the mortgage company a commission of two-percent (2%) which is called a service release premium. That term is NOT known on the streets but it DOES EXIST in the industry. So, on a commission of two-percent (2%) and a loan portfolio of four-million dollars ($ 4,000,000) ABC Mortgage Company gets a monthly check from the buyer of those mortgage notes to the tune of eighty-thousand dollars.($80,000) for that month. This is how mortgage companies can pay out one-hundred percent (100%) commissions and make tons of money.So, along comes the attorney for the mortgage company and he is suing you in court to foreclose on your home. When he petitions the court to accept the lost note affidavit, he is not really telling the truth. The question arises. How could you lose a note that you did not have possession of? Do you think for one "cotton pickin" minute that Honda or Toyota would pay commissions and buy those notes without getting the original notes. That is the only paper that is negotiable.
So, if you didn't have possession, because you collateralized the note, which simply means that you used the value of the note to acquire an equal amount of cash and gave possession of the note to the party that put up the cash. Plain and simple. So, where is the rub? Well, is it possible that the lender through its attorney is possibly committing fraud on the court by stating that "the original note is lost" when in fact it cannot be lost, IF the mortgage company sold it.This makes for a very interesting conversation between folks in the mortgage industry, attorneys representing both the homeowner and those representing the lenders. I would love to see a ruling on this up to the highest level. After all, without proof of the debt, there is no debt.There is a lot of case law where it has been determined that the only proof of debt is the original document or a certified copy thereof. How can anyone produce a certified copy when none exists. In closing, I don't know where this thought is going to lead to or end up, but I was just totally amazed when the conversation of which it was from experts in the mortgage industry started talking about mortgage notes, deeds and collateralization. Today's average person would let this go right over their heads and not know the difference