Challenging the Claim: “We Have the Original Note”

By Donna Steenkamp

One of the most common claims made in foreclosure cases is simple and dangerous:

“We have the original note.”

Judges hear it. Lawyers repeat it. Homeowners are told it ends the case.

It doesn’t.

That statement hides critical facts, ignores how modern mortgage transactions actually work, and often masks a complete failure of proof.

The Myth of the “Original Note”

A promissory note is considered to be a bearer instrument. That means it can be enforced by whoever physically possesses it, much like a check endorsed “payable to the bearer.”

Under the Uniform Commercial Code (UCC), possession alone can be enough.

But here’s the problem: the UCC was written long before mortgage securitization existed.

The UCC does not address how securitized loans are created, transferred, reported, or restricted by trust law and tax law.

Securitized Loans Do Not Follow Simple UCC Rules

Securitized loans operate under an entirely different legal framework.

They are governed by:

• Trust law (usually New York or Delaware)
• Federal tax law
• Pooling and Servicing Agreements (PSAs)
• IRS rules required to maintain REMIC status

To remain valid, a securitized trust must acquire loans within strict time limits and required procedural events.

Under federal tax law, the loan must be transferred to the trust within 90 days of the trust’s closing date. Transfers outside that window are considered prohibited transactions and threaten the trust’s tax-exempt status.

In practice, we rarely see proof that these transfers actually occurred.

Possession Does Not Mean Ownership

This is where foreclosure cases go off the rails.

A servicer or bank may physically hold the original note — but that does not mean it owns the loan.

In many cases, the entity producing the note is only a custodian, not the creditor.

Example: Loans Sold to Fannie Mae

If a loan is sold to Fannie Mae, the original lender usually:

• Sells ownership of the loan
• Retains only servicing rights
• Acts as custodian of the original documents

Because the lender keeps custody of the documents, it can easily produce the “original note.”

But it does not own the debt.

Despite this, servicers routinely claim they are the “holder,” “owner,” and “party entitled to enforce,” without disclosing the true ownership of the loan.

The Missing Chain of Ownership

In many foreclosure cases:

• The note was never properly endorsed into a trust
• Mortgage assignments were never recorded
• The loan is still reported to investors as belonging to a different entity

Yet none of this appears in county land records — and none of it is disclosed to homeowners or courts.

Why PSA Arguments Usually Fail

Homeowners often argue that the trust failed to follow its own Pooling and Servicing Agreement.

Courts usually respond with:

“You are not a party to the PSA, so you lack standing to challenge it.”

That response misses the real issue.

The Real Issue: Clouded Title

While homeowners are not parties to securitization agreements, they are directly harmed by failed transfers.

Why?

Because improper or nonexistent transfers destroy the marketability of title.

If no entity can prove lawful ownership of the debt, the homeowner’s title is clouded by an adverse claim that may not legally exist.

This is not a contract dispute.

This is a title defect.

Quiet Title Is the Proper Remedy

When a foreclosure is based on false claims of ownership or enforcement rights, the appropriate remedy is often an action to quiet title. Follow this link HERE for a description of this service

The goal is simple:

• Force the claimant to prove a valid interest
• Remove unsupported adverse claims
• Restore clear and marketable title

Here is another great article from Donna on Quiet title: https://www.livinglies.me/blogs/7095/quiet-title-actions-stop-foreclosure

When the Trust Isn’t Even Expecting Payment!

In many cases, the trust itself:

• Has already been paid through insurance or buybacks
• Is not expecting proceeds from foreclosure
• Is unaware a foreclosure is even occurring

Servicers may still foreclose “on behalf of the trust,” collect the sale proceeds, and keep the money themselves. Yes, the servicer, not anyone who was owed any proceeds from a loan, but the servicer themselves not reporting the revenue and simply keeping it. Shockingly, this is all hidden from view.

These facts can be uncovered through proper forensic research and targeted discovery, here at Livinglies/DefendtheForeclosure we are experts in this, call us for help.

Bottom Line

The statement “we have the original note” proves very little.

Possession is not ownership.

Custody is not the right to enforce.

And in securitized loans, the real story is almost never told — unless the homeowner forces it into the open. Ask us how we do this at Livinglies/DefendtheForeclosure

YOUR HOME IS YOUR CASTLE WE HELP YOU DEFEND IT

Tags: foreclosure defense
Posted in Fabrication of documents, Foreclosure Questions, legal standing, Servicer |