A quiet title action is a lawsuit by a homeowner against the bank claiming to own the homeowner’s mortgage loan to force the bank to prove that it owns the promissory note for the loan. If the bank cannot prove that it owns the promissory note, the homeowner should win the quiet title case.
Winning the quiet title case means that the mortgage is extinguished (deleted) and the homeowner owns the property free and clear of the mortgage. The homeowner owes no money to the bank and may keep or sell the home as desired.
QUIET TITLE: BANK MUST PROVE OWNERSHIP OF THE MORTGAGE LOAN
In order to stop a homeowner from winning a quiet title case, the bank must prove that it owns the homeowner’s mortgage loan.
To prove ownership of a mortgage loan, the bank (or its attorneys) must possess the original promissory note for the mortgage loan, and it must have been properly endorsed (signed over) by a person with authority to assign the loan. The note can be endorsed to the bank or endorsed “in blank,” such as “Pay to the Order of _________________________. Signed, Rabid Robosigner.”
Even when a bank produces a supposedly “endorsed” promissory note in a quiet title case, there may be numerous grounds to challenge its validity (and the bank’s claim to own the mortgage loan). The reasons why an “endorsed” promissory note may be legally defective are beyond the scope of this article, but stay tuned.
FORECLOSURE: BANK MUST PROVE RIGHT TO ENFORCE THE MORTGAGE LOAN
Ironically, to win a foreclosure case and take away a family’s home, the bank does not have to own the mortgage loan. It only has to prove that it has the right to enforce the loan.
Although the foreclosing bank still must possess the original promissory note, the note does not have to be endorsed. The law only requires the bank to present proof that the previous owner of the loan had the intent to transfer the loan to the foreclosing bank.
It has become harder for banks to prove intent to transfer since the Silverberg case, which invalidated the majority of mortgage loan transfer documents on the basis that they were illegally executed by “robo-signers” claiming to represent MERS (which did not own the loans and had no authority to transfer them).
Still, it is easier for a bank to prove its right to enforce a mortgage loan (in a foreclosure case) than to prove it owns the loan (as required in a quiet title lawsuit). Since the bank must prove more to win the quiet title case, a homeowner may have a better chance of winning a quiet title lawsuit than a foreclosure case involving the same mortgage loan.
For further information on the benefits of quiet title lawsuits, please contact our office.
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