'Zombie notes' live to haunt deed transfers - The News-Press

TIMELINE

Here's what happened, according to Lee County court documents:

1. Marshall Watson, the attorney for Fannie Mae and for Bank of America, sends a document called a deed in lieu of foreclosure to Cruz in late 2009. The document, when signed by Cruz, transfers ownership of the house in Tice from him to Fannie Mae.

In exchange, Fannie Mae agrees "that it is releasing the promissory note" and it won't sue Cruz for money owed under either the note or the mortgage. Cruz signs the deed and returns it to Watson.

2. On Feb. 15, 2010, Bank of America - which was handling Cruz's loan for Fannie - simultaneously records the deed in lieu of foreclosure and assigns its ownership of the mortgage and note back to Fannie Mae.

The bank handling a loan typically is assigned ownership temporarily so it can deal with the case. Bottom line: Fannie Mae now has ownership of the house in Tice.

3. On April 23, 2010, Fannie Mae records a satisfaction of mortgage, which discharges Cruz's $123,750 mortgage.

The document does not, however, mention the note despite the language of the deed in lieu of foreclosure.

The holder of the note, whoever that may be, has the legal right to recover the mortgage money from Cruz.

GLOSSARY

Deed: A document that legally transfers ownership of property from one party to another. The deed is recorded on public record with the property description and owner's signature. Also known as the title.

Deed in Lieu of Foreclosure: To avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process does not allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure.

Mortgage: A lien on the property that secures the promise to repay a loan. The mortgage gives the lender the right to collect payment on the loan and to foreclose if the loan obligations are not met.

Note: A legal document obligating a borrower to repay a loan at a stated interest rate during a specified period; the agreement is secured by a mortgage that is recorded in the public records along with the deed.

Satisfaction of a mortgage: A document acknowledging the payment of a mortgage debt

Source: http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNGhYw5e0xTy47ppsd2m_Fc3com-pw&url=http://www.news-press.com/article/20110619/BUSINESS/106190390/-Zombie-notes-live-haunt-deed-transfers

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