You Can Stop Foreclosure and Put the Lender on the Defense.

by: Kenneth M DeLashmutt

Step One: Answer the Foreclosure Lawsuit
Foreclosure Filing Schedule:
You receive a Summons and Complaint...

(The plaintiff--bank, lender or other creditor--starts the foreclosure by having a marshal serve the defendant--owner or borrower--with a Summons and Complaint.) You can check the foreclosure rules in your State. Click on the following link:

Within 2 days of the Return Date on the Summons...File an Appearance

Within 15 days of the Return Date on the Summons...

File and send an Answer. Be sure to put a certification of service at the end of your answer, and
that you have sent your Answer to everyone who has Appeared in the case. You will need to sign
the certification separately from your signature on the Answer.

If you choose foreclosure by sale, file a Motion for Foreclosure by Sale

Step Two: The Lender Must Prove Existence of the Note.

To recover on a promissory note, the plaintiff (the Lender in the case of foreclosure) must
prove:(1) the existence of the note in question; (2) that the party sued signed the note; (3) that the
plaintiff is the owner or holder of the note in due course; and (4) that a certain balance is due and
owing on the note.

Trial court erred when it did not proceed to take testimony before it entered default judgment
(see definition below) for the plaintiff; the unsworn statement of plaintiff's (plaintiff is the lender)
attorney could not support default judgment rendered.”

It is also true, in mortgage foreclosures, prove up of the claim requires presentment of the
"original" promissory note and general account and ledger statement. Claim of damages, to be
admissible as evidence, must incorporate records such as a general ledger and accounting of an
alleged unpaid promissory note, the person responsible for preparing and maintaining the account
general ledger must provide a complete accounting which must be sworn to and dated by the person
who maintained the ledger.

Does the Lender have the "Original" Note in Hand?

To recover on a promissory note, the plaintiff must prove: (1) the existence of the note in
question; (2) that the party sued signed the note; (3) that the plaintiff is the owner or holder of the
note in due course; and (4) that a certain balance is due and owing on the note.

1) the existence of the note in question

2) If the "ORIGINAL" note you signed in ink that contains your signature is claimed to be lost,
stolen, missing and/or destroyed, then your defense is as follows:

3) the "named" Plaintiff is not the 'holder in due course" of the note and only an agent or nominee
for the true beneficial owners and holders in due course;

4) there may be fraud upon the court in that the named Plaintiff may not have ANY interest to the
note and that the supposedly lost note is not lost, but may have been intentionally destroyed due to
missing assignments on the note which may have made it void and a legal nullity, thus they have
exploited key and vital evidence;

5) there is no proof that the named Plaintiff ever held the note or took possession of the note and
thus has no claim or right to bringing about the foreclosure;

6) there is no proof, without the note, that a proper chain of assignments took place and that the
lien positions were properly perfected;

7) other unnamed and disclosed real parties in interest may have a claim to the note and be the
rightful beneficial owners to the note and must be identified and brought before the court;

8) there may be several unnamed and disclosed real parties in interest may have a claim to the
note and be the rightful beneficial owners of the note;

9) that the party sued signed the note

10) If the "ORIGINAL" note you signed in ink that contains your signature is claimed to be lost,
stolen, missing and/or destroyed, then you need to notify me and also put on affirmative defenses

11) the note in question is not the note you signed and executed in ink and only the one you
signed in ink that presumably contains your fingerprints can be relied upon by your handwriting
analysis expert;

12) in an electronic age, it is a simple matter to place someone's signature or image upon a
document and that it is very difficult to imagine such a valuable negotiable instrument being lost or
missing without a nefarious motive.

13) that the plaintiff is the owner or holder of the note in due course;

14) If the "ORIGINAL" note you signed in ink that contains your signature is claimed to be lost,
stolen, missing and/or destroyed, then you need put on affirmative defenses that:

a) the mortgage industry, investors, and GSE's such as Fannie Mae, Freddie Mac, and FHLBs
etc. have a requirement that the last endorsement to them be undated and "blank" leaving the payee
line blank and making the negotiable instrument a sort of "bearer bond" and instrument. as such, any
party finding or stealing the note can place their name on the payee line, claim ownership of the note,
and sell the note to others who may make a demand upon you in the future. as such, you require
money to be deposited in an escrow account or with the court in an amount equal to the amount
claimed owed on the note, until such missing note is found or upon your death. notes have a life of
their own...

b) if the note was destroyed or lost intentionally (the industry maintains this practice) then they
may be trying to hide the beneficial owners and shield them from any assignee liability arising from
the actions of the servicer who they hire, supervise and most importantly authorize to foreclose upon
you. without the note, since subsequent endorsements are not recorded to avoid payment of taxes
and t hide true and real beneficial interests, there is no possible way to determine who ever held a
rightful interest in the note and who you may have claims or counter claims against and who should
be presently before the court as a real party in interest.

c) Furthermore, if there are missing assignments of the original note and the assignment went from
Lender A to Lender B to Lender D without an intervening assignment from Lender B to Lender C
and From Lender C to Lender D, then the note may be void and a legal nullity in your state.

d) It is industry practice to not name the GSE, investor, or real party in interest in foreclosure and
to use as a front for the Plaintiff:

i) The very original lender who may or may not even be in business any more or sold their interest
in the note long ago, only to have a claim made upon them for repurchase;

ii) A Servicer of even "special servicer" who is acting as an agent for the investors, GSE's or real
party in interest, but has no beneficial ownership in the note since they are only being paid to collect
and foreclosure by the real parties in interest

iii) A "nominee" such as MERS who has no legal authority to foreclose upon you and do business
in your state and who according to their own written documents and verbal assurances never hold
the note or own "any" beneficial interest in the note!!!!!

e) Notes are pledged, sold, bifurcated, and traded in various derivative transactions like
bubblegum baseball cards and their transfers, sales, pledges etc. Are not publicly recorded. As such,
only possession of the actual original note can prove the actual owner and holder in due course of
the note and who you can make an offer of payment to for purchase of the note by yourself, another
family member or partner. You have a right to know the rightful owner of the note so an offer for
payment of the note at a discount and at fair market value can be made. If the note has been pledged
and encumbered, then that party must be made aware of the foreclosure and your right to negotiate
with them a payment and release of the note by you, other lien holders or private parties;

f) Notes are traded often and you need to inspect the physical note to see who the real prior
parties were that held and endorsed your note since you may have counter and cross claims against
them and need to bring them before the court for the action, since they may have improperly inflated
your principal balance, amount owed or escrow account by not applying your payments correctly;
adding fees not legally owed by you to the principal balance; miscalculating the interest and not
properly amortizing your loan; fraudulent selling your loan or misreporting you on your credit report.

g) Federal Circuit Courts have ruled that the only way to prove the perfection of any security
[including promissory note] is by actual possession of the security. Current or prior possession must
be proved up.

(h) that a certain balance is due and owing on the note.

15) You must have the master transaction histories and general ledgers for the account since a
"dump," "summary," or redacted record cannot be relied upon to determine the rightful amounts
owed by having a complete audit of your account. In order to conduct a proper audit, master
records and all prior records must be compiled, reviewed, analyzed, and reconciled. In is not you
responsibility to prove each payment was made. It is your responsibility to say a payment was made
and provide evidence, including your word that it was made. It is the note holder's duty and
responsibility to validate the claims being made on the note and the amount owed. If they have the
master records or claim that the records of prior servicers are missing, then there is no rightful way
for anyone to prove up the balances and amounts they claim are owed!!!! Furthermore, you must

a) That the principal balance claimed owed, is not owed, and is the wrong amount.

b) That the loan has not been properly credited and amortized;

c) That the current servicer cannot be relied upon to testify and certify that prior amounts,
transactions, credits, debits, charges and fees added by prior servicers were indeed proper and
correct and that the account they were transferred was properly amortized and credited. As such,
the person holding the ledgers at the prior servicer must come and testify as to the amounts owed on
the note.

d) dumps and summaries of amounts owed cannot be relied upon and only original ledgers and
master records and the keeper of those records cant testify as to the amounts claimed owed and

Supporting Case Law

Where the complaining party cannot prove the existence of the note, then there is no

See Pacific Concrete F.C.U. V. Kauanoe, 62 Haw. 334, 614 P.2d 936 (1980), GE Capital
Hawaii, Inc. v. Yonenaka 25 P.3d 807, 96 Hawaii 32, (Hawaii App 2001).

SiwooganockBank in Lancaster NH, in alleged foreclosure suit, failed or refused to produce the
actual note which Siwooganock alleges Eva J. Lovejoy owed.

To recover on a promissory note, the plaintiff must prove: (1) the existence of the note in
question; (2) that the party sued signed the note; (3) that the plaintiff is the owner or holder of the
note; and (4) that a certain balance is due and owing on the note. See In Re: SMS Financial LLC.
v. Abco Homes, Inc. No.98-50117 February 18, 1999 (5th Circuit Court of Appeals.)

Volume 29 of the New Jersey Practice Series, Chapter 10 Section 123, page 566, emphatically
states, “...; and no part payments should be made on the bond or note unless the person to whom
payment is made is able to produce the bond or note and the part payments are endorsed thereon. It
would seem that the mortgagor would normally have a Common law right to demand production or
surrender of the bond or note and mortgage, as the case may be. See Restatement, Contracts S
170(3), (4) (1932); C.J.S. Mortgages S 469, in Carnegie Bank v, Shalleck 256 N.J. Super 23
(App. Div 1992), the Appellate Division held, “When the underlying mortgage is evidenced by an
instrument meeting the criteria for negotiability set forth in N.J.S. 12A:3-104, the holder of the
instrument shall be afforded all the rights and protections provided a holder in due course pursuant to
N.J.S. 12A:3-302"

Since no one is able to produce the “instrument” there is no competent evidence before the Court
that any party is the holder of the alleged note or the true holder in due course. New Jersey common
law dictates that the plaintiff prove the existence of the alleged note in question, prove that the party
sued signed the alleged note, prove that the plaintiff is the owner and holder of the alleged note, and
prove that certain balance is due and owing on any alleged note. Federal Circuit Courts have ruled
that the only way to prove the perfection of any security is by actual possession of the security.

Supporting Case Law

Unequivocally the Court’s rule is that in order to prove the “instrument”, possession is

See Matter of Staff Mortg. & Inv. Corp., 550 F.2d 1228 (9th Cir 1977). “Under the Uniform
Commercial Code, the only notice sufficient to inform all interested parties that a security interest in
instruments has been perfected is actual possession by the secured party, his agent or bailee.”
Bankruptcy Courts have followed the Uniform Commercial Code. In Re Investors & Lenders, Ltd.
165 B.R. 389 (Bankruptcy.D.N.J.1994), “Under the New Jersey Uniform Commercial Code
(NJUCC), promissory note is “instrument,” security interest in which must be perfected by

Step Three: Audit Your Closing Documents for TILA Violations, Illegal Kickbacks and

In order to find for consumer protection law violations you will have to gather and assemble your
loan and closing documents and put them in order.

Required Documents for your Audit

To begin the Audit process, put together a package of the following documents:

NOTE: All of the following documents are required.

If you do not have all of the documents DO NOT call your lender unless you have sent the lender
the RESPA document the “qualified written request.”

List of loan documents for audit.

*anything that was given to you at the time of signing the loan

*Promissory Note (very important)

*Mortgage or Deed of Trust (very important)

*Application for the loan, if available

*Good Faith Estimate (very important)

*Settlement Statement (very important)

*Right to Cancel/Right to Rescission (very important)


*HUD 1 Statement

*TILA Disclosures (very important)

*RESPA Servicing Disclosures

*Any and all disclosures (very important)

A copy of the current billing statement.

A copy of any notifications from the lender or other party of a change in where the borrower is
to send the payments. This may be because the lender sold the note (a new assignee), or sold the
rights to collecting the payments (a new servicer).

A copy of any default notices, acceleration papers, or foreclosure paperwork.

A copy of any and all court paperwork if the property is in

foreclosure or there is any court process ongoing that involves this property. If you do not have
this paperwork, it must be obtained from the court files.

What are you looking for?

Now you can audit your closing documents and look for TILA, HOEPA and RESPA violations.

If the answer to any of the following questions is "yes,"

you are most likely a victim of predatory lending practices and may be able to void the
mortgage and apply 100% of your payments to principal. And, you may also be able to recover
money damages.

Such violations can be used as a defense to a mortgage foreclosure. If there is a violation,

1. Have you repeatedly refinanced your loan? Was the last refinance within the last 3 years?
(A common predatory practice is "flipping," which involves "repeatedly refinancing a mortgage loan
without benefit to the borrower, in order to profit from high origination fees, closing costs, points,
prepayment penalties and other charges, steadily eroding the borrower's equity in his or her

2. Did you increase rather than lower your rate upon refinancing?

3. Are you paying an interest rate in excess of 9.5%?

4. Was the loan obtained to pay for home improvement work that was not done properly, or
even at all?

5. Have you had problems with the mortgage company regarding untimely posting of monthly
payments? Sudden increases in payments? Adding amounts to your balance for insurance, "property
preservation," or other "advances"? Does your principal balance never seem to go down?

6. Were you charged high closing costs (points and fees) on the mortgage?

7. Did the terms of the mortgage change to your detriment at the last minute before the

8. Did the lender pay money to your mortgage broker (look on your HUD-1 Settlement
Statement for a "premium" or "YSP" or "yield spread premium" or "POC", "Paid Outside of

9. If you have an adjustable rate mortgage, were any adjustments done improperly? Can you
even tell if the adjustments were correct or not?

10. Does your loan contain a prepayment penalty?

11. Do you believe you were treated unfairly by your mortgage company? Has
correspondence with the mortgage company gone unanswered? (Mortgage companies have a
statutory obligation to respond to complaints and requests for explanations of accounts. Often, they
don't. Each failure may entitle you to $1,000. If your claim against the mortgage company may
exceed the number of monthly payments you allegedly missed, the mortgage company may not be
able to prove that you are in default.)

12. Did all collection letters sent to you by debt collectors comply with the Fair Debt
Collection Practices Act? (Up to $1,000 more if they did not.)

13. Did you (or anyone else who has an ownership interest in and lives in the house) receive a
"notice of right to cancel" that was not completely filled out?

14. Did you receive your copy of the loan documents at the closing (as opposed to being sent
to you later)?

15. Did you sign a document at the closing stating that you were not canceling?

16. Did the closing occur by mail, or at your home, or in another city?

The following is an example of some of the other TILA violations you may find in your closing

Junk charges
(i.e. yield spread premiums and service release fees)

Payment of compensation to mortgage brokers and originators by lenders

Unauthorized servicing charges

(i.e. the imposition of payoff and recording charges)

Improper adjustments of interest on adjustable rate mortgages



Referral fees to mortgage originators.

(i.e. a lender who pays a mortgage broker secret compensation may face liability for inducing
the broker to breach his fiduciary or contractual duties, fraud, or commercial bribery)

Failure to disclose the circumstances under which private mortgage insurance (''PMI'') may be

Underdisclosure of the cost of credit

Excessive escrow deposits

Breach of Fiduciary Duty

You may also find breach of contract claims.

There is a common assumption (among judges, borrowers, and the public) that mortgage
companies do not desire to foreclose and acquire real estate. This assumption is no longer well
There are an increasing number of "scavengers" that buy bad debts, including mortgages, for a
fraction of face value and attempt to enforce them. Such entities profit by foreclosure. "Mortgage
sources confide that some unscrupulous lenders are purposely allowing certain borrowers to fall
deeper into a financial hole from which they can’t escape. Why? Because it pushes these consumers
into foreclosure, whereupon the lender grabs the house and sells it at a profit.
 signed, Kenneth M. DeLashmutt
"Predatory Lending Defense Specialist"

Our mission is to educate homeowners about predatory lending practices, bank fraud
and the legal options available to them.

write bankfraud

We believe that if you don't know your rights, you don’t know your options.
Find out if you are a victim of predatory lending practices: