One foreclosure self-defense move that seems to be growing in popularity is the “produce the note” strategy, which can be quite effective in stopping foreclosure in its tracks and buying you more time to pursue other options. Implementing the strategy differs depending on whether you live in a state that follows a judicial or non-judicial foreclosure process:

• In states that require judicial foreclosure, the lender must file suit to obtain permission to proceed with the foreclosure sale. This initiates a legal process in which you can simply demand that the lender “produce the note” – the promissory note or I.O.U. you signed when you took out the mortgage.
• In states that allow non-judicial foreclosure (more than half the states), you receive a notice of intent from the letter prior to the foreclosure sale and the process occurs outside of the judicial system. You can bring your case inside the judicial system by filing your own lawsuit against the lender. In the course of the legal proceedings, you can demand that the lender “produce the note.”

Requesting that the lender “produce the note” challenges the lender to provide the document proving that you agreed to pay back the money. That certainly sounds easy enough for the lender to do, right? They simply pull your file and fax the signed promissory note to the lender. Unfortunately for your lender, but fortunately for you, it’s not always that easy.

Most mortgages are repackaged as mortgage backed securities (MBS’s) and sold to Wall Street investors, where they can be traded to other investors. As the paperwork gets shuffled around, chances are good that documents, such as the mortgage and promissory note you signed, will get lost, misplaced, or warehoused in a location that’s not easily accessible. While lenders can usually track down the documents they need to proceed with a foreclosure, it can take them several weeks or even months to find the documents. In the meantime, you have several extra weeks or months to pursue other options.

Remember, the only way this strategy can help is if you remain in your home. If you have abandoned your home prematurely believing that you could not possibly save it from foreclosure and the bank has already secured its right to foreclose, you may be out of luck, so:

• Stay in your home.
• Research foreclosure alternatives, including loan modification, refinancing, selling your home, forbearance (payment plan), bankruptcy, offering a deed in lieu of foreclosure, and so on. Remember that the “produce the note” strategy is a delay tactic, not a long-term solution.
• Be patient and persistent. The difficulty of locating your note might be enough leverage to elicit an alternative workout solution from your lender.
• Consult a local foreclosure attorney to find out whether your state follows a judicial or non-judicial foreclosure process.
• If your state follows a non-judicial foreclosure process file your own lawsuit against the lender, so you can employ the “produce the note” strategy. While you can file a lawsuit yourself, I strongly encourage you to work through a reputable foreclosure attorney.

Keep in mind that fighting to keep your home helps defend the American Dream of Homeownership for everyone. It helps make homes more affordable, preserve the value of your neighbors’ homes, stabilize the neighborhood and the school system, and improves the tax base. It’s your duty to fight to keep your home.

Leading up to the bursting of the housing bubble, many lenders were selling risky loans, primarily to first-time buyers who had no idea what they were getting themselves into. In today’s blog post, I address a question that a couple emailed me describing a classic case of a homebuyer getting trapped into adjustable rate mortgages that they cannot afford and cannot refinance out of. This is likely to sound familiar to far too many homeowners.

Question: I believe our situation is similar to the one many Americans face. Being first time homebuyers, my wife and I were naive enough to believe, “Why would a lender give us a loan if we couldn’t pay it back?” Well, they did give us a loan; the classic foreclosure loan as I now call it - an interest only, no down payment, 5 year ARM. We have 2 years remaining on our ARM. We have been unable to refinance because we now owe approximately $150,000 more than the home is currently worth. And, it seems the lender is only interested in a loan modification if we begin defaulting on our loan. We’ve managed to make our payments the past 3 years, and should make it through the next two years, but will probably run into problems in 2011 when the ARM expires. We want to be responsible and address the problem now, before we start defaulting. Does the housing bailout program address our situation? What can we do?

Answer: You’re right; your situation is very common across America today. You’re also correct when you say it’s difficult to impossible to get a lender to modify a loan prior to the borrower becoming delinquent. You’re far from alone in your frustration. In my opinion, this reactive approach only prolongs the negative economic impact of devalued housing and encourages defaults. Lenders should be as proactive in offering loan modifications as they were when they were selling these high-risk loans to consumers.

To answer your question, we don’t know for sure what exactly the President’s home retention plan will include. The “rules” are still be sorted out. The President has said in press conferences that the plan will include provisions for adjusting or modifying loans that are not delinquent, but what exactly that looks like, we don’t know for sure just yet. So, at the risk of not answering your question at all, that’s the best I can do for now.

I will be posting articles and blog reviews of the rules once they’re made public. Keep checking here or KeepMyHouse.com for updates and analysis as these rules and their implementation begin to unfold.

This doesn’t mean you should simply wait to see what happens. I encourage all homeowners who are struggling to make their payments to start exploring all of their options immediately. Consult with a bankruptcy attorney to weigh the pros and cons of declaring bankruptcy, talk to your lender about a possible short sale or principal forbearance, and so on. You may have a dozen possible options. In addition, you may want to consider contacting a real estate attorney to determine whether you are the victim of predatory lending or other inappropriate actions on the part of the loan originator or lender. This may give you leverage to convince the lender to reconsider the option of modifying your mortgage loan.

March is Dummies Month – a time when my publisher, John Wiley & Sons Publishing, ramps up promotional efforts for books in its For Dummies series, and Dummies authors like me have the opportunity to do our small part to support our publisher’s efforts. Please join me in celebrating Dummies Month and saving a few bucks on your purchase of Foreclosure Self-Defense For Dummies.

You can buy Foreclosure Self-Defense For Dummies directly from Wiley by clicking the image above and to the left of the first paragraph of today’s post, or you can purchase it from your favorite bookstore – Amazon.com, Barnes & Noble, Borders, or any other store. Be sure to save your receipt. You can then download and print the Dummies Month $5 Rebate Form, complete it, and submit it to Wiley along with your receipt to receive your $5 rebate.

As I alluded to in my last post, I had the opportunity to appear on CNN over the weekend. In an hour-long special report on the foreclosure crisis, I answered a series of hard-hitting questions from homeowners facing the prospect of losing their home in foreclosure:

Part Two:

You can find detailed information on many of the topics I addressed in the interview in my book Foreclosure Self-Defense For Dummies.

If you are facing foreclosure, chances are you may not be thinking straight. You’re running short on money, you’re having a difficult time paying your bills, and your bank is probably sending you one notice after another warning you that if you fail to do something soon, they will be forced to foreclosure on your home. Unless you win the lottery, you may be thinking, what recourse do I have?

Trust me when I tell you I understand. It’s far too easy to get overwhelmed in these types of situations — so overwhelmed, in fact, you may not even realize where to start. In this blog entry, which you may be reading because of my recent (Feb. 21, 2009) appearance on CNN, I share the most important Do’s and Don’ts when facing foreclosure. Regardless of your situation, each of these points matter!

Do tell your spouse or significant other: It’s tempting to hide bad news from your partner, but this can actually work against you. For example, in most cases, you cannot legally negotiate a loan modification without your spouse. You and your partner are in this together and are stronger as a team. Regardless of the reason, disclose it to your partner, put it behind you, and work together to resolve the crisis.

Don’t assume it’s too late to act: As long as you are still residing in your home, you have opportunities to keep your home. (Read “Consider All Your Foreclosure Options” for more information on the options available to all homeowners.)

Do realize that your lender wants to resolve the issue: The only way your lender makes money is if their loans perform—modifying a loan through loan modification makes it perform for the lender. Banks and other lending institutions make more money and lose less money if you can make your payments. When they foreclose, they not only lose your monthly payments, they also have the expense of foreclosing (attorney fees), rehabbing the home, and then selling it (agent commissions).

Don’t go into hiding: As hard as it is, failing to pick up the phone, return phone calls, or respond to notices is one of the worst things you can do. Your lender needs to know from you or your legal representative that you are aware of the delinquent payments and are working on a solution.

Do seek professional representation: You may be able to negotiate a loan modification yourself by working directly with your lender, but an experienced attorney or loan modification company can properly represent your case to your lender and make sure your loan is modified to a level of affordability. Homeowners who represent themselves often overestimate what they can afford to pay and end up in the same situation months after they receive their modification. Working with an attorney helps you reduce the likelihood of making the same mistake twice.

If you are currently facing foreclosure, you may be wondering if a loan modification can help you stay in your home. A loan modification changes the terms of your home loan in an attempt to make its monthly payments more affordable. As a result of applying for one, your lender may agree to any of the following loan modifications:

Lower and fix your interest rate: Your lender may lower your interest rate considerably. In addition, if you have an adjustable-rate mortgage, the loan modification must leave you with a fixed interest rate, so the lender cannot raise the rate later.

Extend your term: The term is the time you have to pay off the loan. For example, if you’ve been paying 5 years on a 30-year mortgage, you have 25 years remaining in your term. A loan modification can extend the term to spread out your payments over a longer period of time, thus reducing your monthly payment.

Reduce your principal balance: Sometimes, lowering your interest rate and extending its term does not provide sufficient relief. In such cases, your bank may be willing to agree to lower the balance due on the loan. Why? Because in today’s market, your home may not be worth nearly as much as you paid for it. If the bank were to foreclose and sell the home, the sales price probably wouldn’t cover the balance due. Many banks would rather lower the balance due and enable you to keep paying than go through the hassle and expense of kicking you out and selling the home.

Forgive penalties and late fees: If you have missed a couple payments, your lender has probably charged you extra fees or penalties for the late or missed payments. During a loan modification, they must drop these fees from the amount you owe.

Roll delinquencies and costs into the principal: Your lender knows that if you are missing payments you probably have insufficient funds to catch up on those missed payments or pay any of the legal fees required to process your loan modification. To help, the lender can roll all of your delinquent payments and any additional costs that qualify into the principal, so you can pay them off over the course of many years.

Re-amortize the loan to lower your payment: Once the lender calculates the new balance due (after lowering the principal balance or rolling delinquencies and costs into the principal), it can recalculate your monthly payments with the goal of reducing what you pay.

Not everyone facing the prospect of losing their home qualifies for a loan modification, which is what I’ll cover in a follow-up post later later this week.

The State of Florida and banking and mortgage lending industry leaders today announced a voluntary agreement to provide foreclosure relief to Florida homestead property owners for the next 45 days. In making the announcement, Governor Charlie Crist encouraged real estate lenders to step up their efforts to actively negotiate with distressed homeowners during the coming months to help people stay in their homes.

The Florida Bankers Association and Florida Credit Union League have appealed to their member institutions to voluntarily cease filing new foreclosure petitions and scheduling foreclosure sales for homestead properties during the 45-day period. In October, Crist met with representatives from the Florida Bankers Association to discuss Florida’s economic situation. Lenders have been reviewing alternatives to foreclosure ever since, according to the Governor’s office.

According to RealtyTrac, Florida has the nation’s third-highest state foreclosure rate, with 166,600 households statewide being impacted by foreclosure activities in October 2008.

Earlier today, the Florida Department of Community Affairs submitted to the U.S. Department of Housing and Urban Development (HUD) their proposed plan for distributing more than $90 Million in federal funds to smaller urban and rural communities to respond to rising foreclosures and falling home values. The funds will go to local governments to purchase foreclosed homes at a discount and rehabilitate or redevelop them. (In September of this year, HUD announced that targeted Florida cities and counties would receive a total of $541 million in federal Community Development Block Grant (CDBG) funds for this purpose. The funds as dictated under the Housing and Economic Recovery Act of 2008 passed by Congress earlier this year are administered by the Florida Department of Community Affairs, Division of Housing and Community Development.)

Edward Sandford Martin once said:

Thanksgiving Day comes, by statute, once a year; to the honest man it comes as frequently as the heart of gratitude will allow..

Martin’s thoughts are particularly profound for those of us who wage battle in the war against increasing and unnecessary home foreclosures. We consistently hear help is on the way and that millions of homes and families will be spared, yet each and every day, more homes receive foreclosure notices and little is being done to protect this country’s most value asset — its homeowners.

Wherever you are today, tomorrow, the next day or the day after that, please know that I care and am working daily to convince the decision-makers to change their approach and policy. In the meantime, here’s wishing you and your family a very Happy Thanksgiving and fall harvest.

Here’s one I couldn’t have predicted. With Cook County, Illinois, on pace to conduct a record number of evictions this year – and an unprecedented number of evictions due to mortgage foreclosures – Cook County Sheriff Thomas J. Dart announced today he is suspending all foreclosure evictions Thomas J. Dart announced today he is suspending all foreclosure evictions. That’s right…. you read that correctly… Cook County Sheriff Thomas J. Dart announced today he is suspending all foreclosure evictions!!

The move comes as a result of the growing number of evictions that involve renters, most of whom are dutifully paying their rent every month only to later learn their landlord has fallen behind on mortgage payments and the building the live in has gone into foreclosure.

While mortgage companies are supposed to conduct a basic due diligence investigation before requesting an eviction, identifying all occupants, sheriff’s deputies are regularly finding no work done by the mortgage company in advance, leaving the identifying work to deputies working at taxpayer expense.

“These mortgage companies only see pieces of paper, not people, and don’t care who’s in the building,” Dart says. “They simply want their money and don’t care who gets hurt along the way. On top of it all, they want taxpayers to fund their investigative work for them. We’re not going to do their jobs for them anymore. We’re just not going to evict innocent tenants. It stops today.”

Dart, who I believe to be the first sheriff of a major metropolitan area to take such a step, says he wants a safety net to be established either by the Illinois judiciary or state legislature, to protect those most harmed by the mortgage crisis. Specifically, he wants mortgage companies to be forced to provide sufficient information to the Sheriff’s Office in order to conduct an eviction. That will provide greater notification to tenants that their building is in foreclosure and will require mortgage companies and their attorneys to do more leg work in advance of an eviction.

Because the banks aren’t doing that now, more than 1/3 of all trips by sheriff’s eviction teams results in finding nobody home to verify who lives there or finding someone other than the mortgage-holder.

Last year, Dart pushed a bill before the Illinois Legislature that would have required mortgage companies to identify any children or senior citizens living in a unit before requesting an eviction. Dart hoped to link those vulnerable residents with social service agencies, but banking and real estate industry lobbyists killed the bill.

Foreclosure filings have steadily climbed in Cook County, Illinois, since 1999 and the number of foreclosure evictions has almost tripled in just two years. In 1999, there were 12,935 mortgage foreclosure cases filed in Cook County. Noticeable increases came in 2006, when 18,916 were filed and last year, when 32,269 were filed. This year, Dart projects more than 43,000 to be filed.

Dart said his office is on pace to conduct evictions stemming from mortgage foreclosures at 4,500 properties this year. That compares to just 1,771 in 2006.

“The people we’re interacting with are, many times, oblivious to the financial straits their landlord might be in,” Dart says. “They are the innocent victims here and they are the ones all of us must step up and find some way to protect.”

In my last blog post I mentioned the three "C’s" of dealing with a bank’s Loss Mitigator (Communication, Composure, Credibility). Now I’m going to take you into what may be surprising territory. Some people many not know the following are options when facing foreclosure, but they truly are.

Reinstating Your Mortgage, Like Nothing Ever Happened

Reinstating your mortgage consists of paying a lump some to cover all missed payments and any additional interest, fees, and penalties you’ve incurred as a result of the missed payments. After you reinstate your mortgage, it’s as if nothing ever happened — except for the fact that you may have another loan to pay off, if you had to borrow money to reinstate.

1. Digging up the cash required to reinstate

Reinstating your mortgage sounds like a great idea until you try to figure out how you’re going to come up with the money. Here’s a short list of possible sources for cash:

• Friends
• Relatives
• Bank loan
• Private lender
• Loan against your retirement nest egg
• Loan from your boss
• Assets — sell your stuff
• Loan against any inheritance you may receive

Sell something! If you never sold that vintage car you drove on your first date and you’re storing it in your barn, find out how much it’s worth and sell it. If it’s worth $50,000 and you could sell it quickly for $31,000, do it! After all, where will you store this beauty when they take the house away from you?

2. Borrowing against the equity in your home

Grab a calculator and figure out how much equity you have built up in your home. To do this, simply subtract the total amount you currently owe on the home from a reasonable price that you’re sure you could sell the home for in today’s market. If you end up with a positive number that’s more than a few thousand dollars, then borrowing against the equity of your home to reinstate the mortgage may make sense and be a realistic option.

3. Convincing your bank to reinstate your mortgage

Your bank is probably not exactly eager to offer the option of reinstating the mortgage. You’ve already missed payments or paid late, so your credibility is already in question. At this point, you have to reveal a solid plan and prove to the bank that, after reinstating, you can resume payments.

There is a great deal more I could go into on this subject but the namesake book for this blog really does cover it all. Check out  Foreclosure Self-Defense For Dummies and find the precise answers you need for your situation.