The Common Misconception About Notes and Debt
For most people—including lawyers and judges—the concept of endorsing a promissory note and delivering the “original” means only one thing:
The note is evidence of the debt.
Under the merger doctrine, the transfer of the note equals transfer of the debt.
Therefore, the transferee “owns” the debt.
Banks have exploited this assumption in millions of foreclosures. But it’s counter-intuitive—and wrong.
Why This Bias Is So Dangerous
Breaking through this misconception is essential to foreclosure defense.
In every winning defense I’ve seen, the core fact was this: the debt was never transferred, no matter how many fabricated documents claimed otherwise.
Judges often resist the idea because it seems “impossible.” But the truth is: a note transfer without debt ownership is a sham.
The Missing Holder in Due Course Claim
If the debt really had been transferred, the transferee would claim Holder in Due Course (HDC) status. Under the Uniform Commercial Code (adopted by every state), HDC status:
Defeats virtually all homeowner defenses.
Requires only simple proof:
Produce the note.
Show proof of payment for the debt.
Enforce both the note and the mortgage.
👉 Yet nobody asserts HDC status. Why? Because they didn’t pay for the debt. And if they didn’t pay for it, they don’t own it.
That means they can’t foreclose—unless they can show they’re an agent for a disclosed creditor.
A Practical Analogy: The Car Title Story
To make sense of this counterintuitive concept, consider this analogy:
I own a car. I sign the title over to my friend Jane, but she pays nothing and never takes the car.
I keep the car, drive it, and even reissue the title in my name. Jane just holds the signed title.
Jane then makes 42 fake sales of the car and takes out 7 loans against it, using copies of the title.
Eventually, one of Jane’s lenders “repos” the car, claiming ownership.
Who owns the car? I do. Jane never paid me, so her title transfer was meaningless. Her lenders can’t claim ownership either—especially if they knew it was fraudulent.
This is exactly what happens in foreclosures:
Notes are transferred without debts.
Grantors and grantees don’t own the underlying obligation.
Transfers are paper shams that disguise the absence of a real transaction.
Why Transfer of the Note ≠ Transfer of the Debt
When courts treat the note as “title” to the debt, they’re overlooking a key fact:
A real transfer requires money to change hands.
Without value paid, there is no debt ownership.
Fabricated assignments and endorsements can’t replace a real transaction.
If the truth comes out, the debt belongs only to whoever actually put up money in the loan deal—not the entity waving a note in court.
Foreclosure Defense Strategy
By denying that the note was properly transferred, you shift the burden back to the foreclosing party. They must prove:
That the transfer of the note was part of a real transaction, and
That they paid value for the debt.
Without this proof, foreclosure claims collapse.
Get Professional Help
We assist homeowners and attorneys with:
Foreclosure defense strategy and trial preparation
Drafting discovery requests
TERA (Title & Encumbrances Analysis & Report), an enhanced version of COTA (Chain of Title Analysis)
⚖️ Disclaimer: This article is for educational purposes only and is not legal advice. Hire a qualified attorney for your specific case.
Further Reading
For more on standing in foreclosure cases, see the Legal Aid Federal Practice Manual on Standing published by the Sargent Shriver National Center on Poverty Rights.
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