On Oct. 9th, 2009,  PHH Mortgage Company tried to foreclose on a home owner in White Plains, New York. This backfired however when PHH Mortgage failed to provide sufficient proof of ownership for the property in question in the Southern District federal bankruptcy court and Judge Robert D. Drain court ordered the $461,263 debt to be cleared! The homeowner now owns their house mortgage-free instead of loosing it.

This case may open a new dynamic on future foreclosures. If lenders can’t produce proof of ownership, then borrowers may have the upper hand at last and possibly stay in their homes mortgage-free.

The missing notes may be due to the large amount of mortgage securitizations that took place during the housing boom. These allowed for large groups of bank loans to be bundled together and sold to investors. During this process, some notes were not adequately tracked or recorded, which means that nobody truly knows who owns what.

Source:

MORGENSON, GRETCHEN. “If Lenders Say ‘The Dog Ate Your Mortgage’.” Economy . 24 October 2009.  The New York Times. 1 November 2009. <http://www.nytimes.com/2009/10/25/business/economy/25gret.html>.