Puneet Varma (Editor)

Mortgage note

Updated on
Edit
Like
Comment
Share on FacebookTweet on TwitterShare on LinkedInShare on Reddit

In the United States, a mortgage note (also known as a real estate lien note, borrower's note) is a promissory note secured by a specified mortgage loan; it is a written promise to repay a specified sum of money plus interest at a specified rate and length of time to fulfill the promise. While the mortgage deed or contract itself hypothecates or imposes a lien on the title to real property as security for a loan, the mortgage note states the amount of debt and the rate of interest, and obligates the borrower, who signs the note, personally responsible for repayment. In foreclosure proceedings in certain jurisdictions, borrowers may require the foreclosing party to produce the note as evidence that they are the true owners of the debt.

Contents

Determinants of mortgage type

For the most part, it is the mortgage note which determines the "type" of mortgage:

  • if the note has a fixed interest rate and payments, then the loan is a fixed-rate mortgage (FRM) loan
  • a fixed interest rate with adjusting payments is a Graduated Payment Mortgage (GPM)
  • a floating interest rate and payment amount indicates an adjustable-rate mortgage (ARM)
  • an amortization schedule longer than the maturity date indicates a balloon payment mortgage
  • when the payment schedule calls only for interest and no principal, thus leaving behind the full principal due at maturity, the loan is an interest-only loan
  • a payment adjustment frequency less than the interest rate adjustment frequency implies a mortgage which allows for negative amortization
  • Produce the note defense in foreclosure proceedings

    The chain of title of a promissory note is very important to every homeowner in America. The inability to show a complete chain of title and ownership of a promissory note from Lender A to Lender B to Lender C, etc. has become a major impediment in mortgage servicers ability to foreclose on properties in judicial foreclosure states and in relief of stays in Federal Bankruptcy Court. The issue of standing (in other words, the question of who has the legal right to sue), is the foundation of the produce-the-note strategy, which forces a lender prove that it has a legal right to sue.

    Attorneys estimate that the documents belonging to as many as 50% of the mortgages made between 2001-2008 have been lost or destroyed, leading to demands by borrowers that the foreclosing party produce the note as evidence of the debt.

    Consumer advocates claim that almost all entities attempting to foreclose on homeowners are not the Real Lender, but rather a Servicer collecting monthly payments for a mortgage backed security (MBS) Trust. Therefore, courts have determined that Servicers are not the Real Party in Interest and possess no legal standing to seek relief from the courts.

    References

    Mortgage note Wikipedia