Naked Capitalism-
As we’ve discussed the “where’s the note?” problem of mortgage securitizations, some readers who are old enough to have sold a home more than once have said that while they’d gotten a cancelled mortgage note back on their first sale, on a more recent one, they hadn’t. They were concerned, and as this post will show, they are right to be.
By way of background, the popular press has done the public a disservice by talking about “mortgages”. A “mortgage” consists of two instruments: a promissory note, which is a IOU, and a lien against the property, which is referred to as a mortgage (in non-judicial foreclosure states, they are typically called a deed of trust and confer somewhat different rights, but we’ll put that aside for purposes of this discussion).
What appears to be happening on all too often in Florida is that when borrowers signed warranty deeds in lieu of foreclosure when they can no longer keep these homes, they often get only a satisfaction of mortgage, not a cancelled note. This is not what is supposed to happen...