Foreclosure Defense: Holder in Due Course Argument Refined

It’s no magic bullet but it can be used effectively.

Why the “Holder in Due Course” Argument Matters

If you are facing foreclosure, you might hear about something called a holder in due course (HDC). This term basically means a person or company that legally owns the loan and has rights to collect on it.

To be a true holder in due course, the organization must:

1. Have paid money to buy the loan,

2. Have acted honestly and fairly

3. Not know about any problems or legal defenses that the homeowner might have.

Both a holder and a holder in due course can try to enforce a mortgage note. But there’s a big difference between them:

• A holder in due course has stronger rights — they can usually block most of the homeowner’s defenses in court.

• A regular holder can only collect if they actually paid for the loan and have proof they own it.

So, if your lender can’t prove they’re a holder in due course, it weakens their case in a foreclosure.

The Legal Framework: UCC Articles 3 & 9

• Article 3 (UCC): Governs negotiable instruments (like promissory notes). It allows certain presumptions if the note is treated as negotiable.

• Article 9 (UCC): Governs secured transactions. It requires payment of value as a condition precedent to enforce a lien, mortgage, or deed of trust.

👉 This means mere possession of the original note is not enough. The claimant must prove they paid value for the debt itself.

Why Most Foreclosure Claimants Fail the HDC Test

The failure to allege HDC status is telling. It means at least one of these elements is missing:

• Payment of value

• Acting in good faith

• No knowledge of defenses

And when homeowners raise this in discovery, foreclosure attorneys usually refuse to answer — because they can’t.

This creates an opening for homeowners to challenge standing and push back against foreclosure.

How Judges Treat the Argument

Without objection, many judges simply treat claimants as if they were holders in due course. This is a legal error — but unless the homeowner raises timely objections and preserves the record, appellate courts often consider it harmless.

That’s why strategy matters. Homeowners should:

• Demand discovery on payment of value, good faith, and knowledge of defenses.

• Move for sanctions when claimants refuse to answer.

• File motions in limine to bar foreclosure claimants from presenting evidence when conditions precedent (like payment of value) can’t be proven.

If granted, these motions prevent the claimant from pursuing foreclosure at all.

The Bottom Line

The holder in due course argument is not a silver bullet — but it’s a powerful part of a larger foreclosure defense strategy. By pressing claimants on their inability to prove HDC status, homeowners can strip away presumptions and force the court to address the real issue: no proof of ownership, no foreclosure.

Why You Need a Lawyer

This is not a DIY defense. Arguing HDC status requires:

• Knowledge of state statutes.

• Familiarity with UCC Articles 3 and 9.

• Case law citations to preserve the record for appeal.

A skilled foreclosure defense lawyer can frame the argument, make timely objections, and keep improper evidence out.

Tags: foreclosure defense
Posted in Fabrication of documents, foreclosure defenses, legal standing |