Different Principal Reduction Programs and how They Work

Different Principal Reduction Programs and how They Work

Getting a principal reduction on your principal mortgage balance is beginning to become more common recently with programs such as the HAMP principal reduction atlernative coming into light. These are government subsidized programs, but what about other ways? Ever heard of produce note? This is when your lender does not really own your loan anymore...

It's fairly common for banks to purchase and sell notes, nearly like stocks. But, here's when it gets difficult. If your lender doesn't own your note, just how can they foreclose on you?

In the 1980's, selling notes became a pretty typical practice. Rather than paying millions and millions in fees to county recorders, they created their own system known as MERS. It stands for the Mortgage Electronic Registration System. This eliminated the require to record an "assignment of mortgage" document as was previously the case.

This technique put in place the future of home loan note exchanging as you'll see below...

This is exactly from the MERS Web site (MERSInc.org)::

MERS is an innovative procedure that simplifies the way mortgage possession and servicing rights are originated, sold and tracked. Created by the real estate finance business, MERS eradicates the require to prepare and document assignments when trading residential and commercial mortgage loans. (emphasis added)

I do not know in the event you looked via all of the loan documents when you had been signing them, but there's usually a section in there that appoints MERS as the system of option. This means that anytime within the future they can elect to sell your mortgage loan note to an additional business. This can really happen much more than once! You note can be sold numerous times over and over to various businesses.

So, you wind up thinking that you're paying your loan off to your original lender, but numerous times they have been paid in full for your loan. By using MERS, they have hidden the reality that your note has been sold many times over. They're not your lender at all! If you do some tracking it is not hard to discover who's either.

The reason this is exactly essential from a home foreclosure and principle reduction standpoint is very simple. Legally, if you go into default, only the "holder in due course" (meaning the actual current owner) of your note has the legal standing to foreclose upon you.

If your lender sold your loan, they cannot legally bring a foreclosure action upon you. It's that easy. Only the actual owner of the note can bring a foreclosure. Hiding behind the MERS curtain keeps you within the dark about what has truly happened and makes you believe your former lender can still foreclose upon you.

There is a lot more info available on the legalities of this, but below you will find a great article on the methods to get a principal reduction utilizing this note system and other methods. Just be careful when attempting to go for the produce the not defense in court, you will wish to get an attorney. Even if the laws are on your side, most people can't win again a team of corporate lawyers employed by your lender.

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