“My concern is far greater than this one case. I’ve seen this issue far too often, and I see it as an industry-wide problem. Any time there’s a short sale or deed in lieu with a deficiency waiver, there should be no need for the original Note and Mortgage to be returned to the Plaintiff, yet we all see that happen in virtually every settlement. Why? Is there something nefarious going on here?”


Return of Original Note/Mortgage – After a Settlement

Any attorney who represents homeowners facing foreclosure has seen it. A homeowner settles a case on his/her own via a short sale, deed in lieu of foreclosure, or loan modification. Contemporaneously, the plaintiff’s attorney voluntarily dismisses the case and, in doing so, procures an ex parte Order directing the Clerk to return the original Note and Mortgage to plaintiff’s counsel.

I saw this in a case recently, and it really rubbed me the wrong way. Not the settlement – that was fine. (Great, actually. Any time a client gets a satisfactory resolution, it’s a great feeling.) But the return of the original Note and Mortgage to Plaintiff’s counsel, ex parte, without notice and without hearing … why? Why does the plaintiff need the original Note and Mortgage when the case has settled, the house has been sold, and the bank forgave any deficiency? Why should the original Note be floating around in the stream of commerce, creating the potential for someone to take the position the debt was still outstanding?

Rest here…