A lawyer friend of mine was just telling me of a legal paper he just read… seems people are file’n chapter 13 (this doesn’t seem required but was part of the paper) and with so many loans sold transfered and traded… it’s a pretty simple matter to question if the people claiming to own the loan… really do in fact own it… if challenged they must produce every scrap of paperwork and document every signature… if even one flaw is found in any of the truth in lending documents or if any of the originals can’t be found… then by law you don’t have to pay them… where the chapter 13 comes in… is they might have you owe’n the money… BUT they might not have a good lien on the property… so… yeah they say you owe em… and maybe they can sue you BUT they can’t lein the home until they get a judgement… and if you have filed chapter 13 then… thats no good anyway…
found it interesting
p
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Interesting story.
really was interesting... it came up because... I was questioning how bad could the "bad paper be" that all the banks were holding... I was guessing that it had to average out to be worth better than 60 cents on the dollar... (think that was the figure from the old RTC scam) thats when he informed me that... alot of the paper might be worthless because the loans were so poorly done... and in many case when loans are sold & packaged... there is alot of missing paperwork... and with good lawyering you can/could make them produce a DOCUMENTED paper trail which means every person who ever touched it would have to give sworn statements and document anything they signed... and in the case of maybe 4 holders back on the paperwork they may no longer exist or have filed bankruptcy... then you have the... did they move the paper inside of 1 yr of filing the bankruptcy...
so it seems with the law on your side alot of people could be live'n in Free housing... that they own... the trick might come when they try to sell it...?
p
My experience in the bankruptcy courts was pretty limited since I didn't do much commercial or bankruptcy work. But the starting point is that the Trustee's job is basically to protect the creditors - including the lenders. I don't think they are going to roll over because somebody wants to fight a little.
As far as bringing in everbody that was involved with the paper, that's likely not necessary. Many documents are entitled to presumptions of validity based on filings and such. In most cases, the borrower (bankrupt) is going to be hard pressed to deny that he/she/they signed the origninal documents. that's going to mean that they owe the money - if not to the "last" lender, then to the original one or somebody else.
From a real practical standpoint, I don't see most bankruptcy lawyers going through the work necessary for this. Personal bankruptcy lawyers (as a general rule) get paid a flat fee up front for the case - a few hundred or a thousand dollars. they cannot afford to spend dozens of hours fighting cases like this for no additional money. And, don't kid your self, the banks have lots of lawyers that can "paper" a small guy to death. After all, they get paid by the commercial clients that do have money.
The other part of it is that the Court isn't going to stand for it. Federal courts - and the bankruptcy court is one - do not allow a lot of wasted time and energy. this I can talk about from (painful) experience. It's called a fishing expedition, and it's not encouraged. Correct that, it's discouraged.
That's my take on it.
Story on the tube recently where the paper holder foreclosed and resold with a title company supposedly perfecting the title.
Only problem was that the paper holder in fact did NOT own the property but the company that the paper was sold to did.
Big mess.
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Lenders who file proofs of claims in bankruptcy cases must prove their claim, including ownership of the note. creditors sell, resell and trade entire loan portfolios, with a lot less documentation that they should in many cases.
the bankruptcy reform in 2005 was driven by high risk lenders who bought congress in order to reduce their risk while continuing to make the same stupid loans. the courts generally hate the new laws, and are taking sleazeball lenders to task and holding their feet to the fires. since many mortgage lenders share a lot attributes with storm chasing roofers and asphalt driveway recoaters, very often the current owner of a note can't produce the note (or a copy) or a loan history. If the creditor can't produce proof of the debt or proof of ownership of the debt instrument, then the claim is denied and the lien gets voided.
Edited 9/17/2008 11:13 pm ET by davem