Monday, August 22, 2011


"Providing The Pathway To Justice"
An Attorney Answers … Who is holder of a note

One of our readers that appears to be an Ohio attorney and well versed in foreclosure defense offered a comment to which I replied and to which he again replied giving a more detailed explanation of who is considered to be the holder of a promissory note therefore having the Standing to foreclose.

It is important enough to reprint these comments as the information is important to all those who are facing and/or currently fighting foreclosure.

As this attorney states, it is always recommended that you seek the counsel of a qualified – I stress qualified – foreclosure defense attorney. While I understand that many of you facing foreclosure believe you cannot afford an attorney, I assure you that there are some out there whose fees are reasonable and affordable.

You will not often hear me say this, but if you are in foreclosure then you are not making mortgage payments or paying rent. If you are evicted from your current home you will have to pay rent somewhere so use your diverted funds to fight for your rights and defend your foreclosure.

But to those many who have been so wiped out that eviction would mean absolute homelessness I encourage you to also look for an attorney who can help but at the very least do represent yourself Pro Se. Learn what you can from blogs like this and the several others that are credible and offer sound advice and information. Just answering your summons (in a judicial state) will buy you more time and time is what everyone needs.

Here now the comment conversation from the post Financial Turmoil Evokes Comparison to 2008 Crisis – as posted on August 11, 2011:

On August 17, 2011 at 10:34 AM Ohio lawyer said:

I disagree about ownership of the note being the only issue. Under the UCC, to be entitled to enforce the note, a person MUST be in possession of it (except when they can claim the note was lost, destroyed, etc.). In fact, a person in possession of a note endorsed in blank, even if they stole it, may enforce the note. Ownership is not necessary. Likewise, a person who “owns” the note may not enforce it unless they are also in possession of it. I was not sold on the “show-me-the-note” defense for a long time. But after briefing the issue several times in Ohio, I accepted its importance. Without actual possession of the note, a lender cannot prevail. I agree that standing is a major issue, but “ownership” is not the proper way of thinking about it.
On August 21, 2011 at 3:31 PM Larry Rubinoff said: |Edit This

Thank you for your take on this very important subject. Since standing is a major issue and “”ownership” is not the proper way of thinking about it”, then what is the way to think about it.

Possessing the note, as you say, endorsed in blank, gives the holder the right to foreclose. I was always under the impression that a mortgage note endorsed in blank is not like a bearer bond where anyone in possession of it can execute it. In other words, mortgage notes are not bearer bonds. What is your take on this?

Of course, if a mortgage note is held by someone but has never been endorsed in blank then it is your argument that now the bearer does not have standing. If this is what you are saying, I must agree.

On the issue of lost, stolen or destroyed, banks often use this as an argument and basically are using a “trust me your honor, I did have it at one time but it was lost, stolen or destroyed, therefore I should have the right to proceed with the foreclosure action”.

Too many judges simply accept this from a bank because they are “the bank” and of course, banks don’t lie. Only one judge questioned this in the past asking the plaintiff which occurred.

Was the note lost, stolen or destroyed? It could not have been all three and if you don’t know which it was then you probably did not have it. I believe it was now Supreme Court Judge Schack in New York who questioned and disallowed this argument.

DISCLAIMER: i am not an attorney and my comments do not reflect legal advice in any way. My comments come purley from my research and experience in these matters.

I do, very much, welcome comments from attorneys like the one I am responding to for their legal opinions. More dialogue like this can be of great assistance to our readers and the millions facing foreclosure.

If you are an attorney and would like to publish your views and opinions here at TheForeclosureDetonator please contact me at
On August 21, 2011 at 10:50 PM Ohio Lawyer said: |Edit This

The question is whether someone is a “person entitled to enforce” the note. This status is defined by the Uniform Commercial Code. Below are the relevant provisions of the U.C.C. as adopted in Ohio:
UCC 3-301
(A) “Person entitled to enforce” an instrument means any of the following persons:
(1) The holder of the instrument;
(2) A nonholder in possession of the instrument who has the rights of a holder;
(3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 1303.38 or division (D) of section 1303.58 of the Revised Code.
(B) A person may be a “person entitled to enforce” the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
A “holder” is defined in U.C.C. 3-301
(T)(1) “Holder” with respect to a negotiable instrument means either of the following:
(a) If the instrument is payable to bearer, a person who is in possession of the instrument;
(b) If the instrument is payable to an identified person, the identified person when in possession of the instrument.

These two provisions have to be read together to get the complete picture. Let’s go through each type of person listed in U.C.C. 3-301.

1. Holder – is someone in possession of an instrument which is either payable to that person (i.e. initially made payable to that person, or payable to that person via a special endorsement) or payable to bearer (e.g. endorsed in blank). This person need not be be the “owner” of the instrument, and may be in wrongful possession of it. Under this provision a thief could be a person entitled to enforce the note. All he needs is possession of a note endorsed in blank.

2. Non-holder with rights of a holder – To qualify under this provision a person must: (1) be in possession of the note, but it need not be order or bearer paper; and (2) the person must have been given the rights of a holder. How does someone get the rights of a holder without being a holder? A holder transfers possession to the person and also grants to that person rights through a separate document, but doesn’t get around to negotiating the note. For example, Bank A sells a group of notes to Bank B. The notes are physically transferred to Bank B, but are not endorsed. Bank A also executes a bill of sale acknowledging that it sold the notes to Bank B. Think of it as possession plus ownership without endorsement.

3. Someone not in possession under certain circumstances: There are two possibilities here. The first in the “lost, stolen, or destroyed” note. We see that often in foreclosure cases. The bank has to submit evidence to the Court to prove it can enforce the lost note. The other circumstance is almost never seen so I won’t go into it.

That’s it. Only three classes of people can sue on a promissory note. Aside from “lost note” cases, possession is required. After that you need either negotiation (payable to order or an endorsement in blank) or some other evidence that you are intended by the last holder to be the person to enforce the note.

This framework addresses commercial paper in general. That said, there may be other restrictions on transfers of certain types of mortgage notes. For instance, an FHA note cannot be sold to just anybody. They can only be transferred to other FHA-approved lenders. Some have suggested that such FHA or VA regulations renders notes issued under their programs to be something other than negotiable instruments. I do not know much about those arguments, but want to caution people that generalities are just that – general. Every situation is different and must be evaluated on its own facts.

I can’t emphasize that last point enough. It’s all well and good for people to know the law, but too many borrowers try to go it alone. Law is not viewed in a vacuum; it is applied to fact. Most of the time the fact is harder to come by than the law. I urge borrowers to find counsel to help them. Doing it yourself almost never turns out well.

I agree, Judge Schack drew attention to these issues by asking the simple questions and demanding some proof. Now, judges everywhere are more likely to listen to a borrower who challenges broad assertions of standing. Currently, this issue is pending before the Ohio Supreme Court and will likely be decided late this year. You can see the briefing on the issues on the Court’s website. The case name is U.S. Bank v. Antoine Duvall, Case No. 2011-0218.

Thank you Ohio Lawyer for taking your valuable time to offer these comments and help educate our readers.

To all attorneys: Feel free to send your information for publication to me at

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