How To Make Your Lender Produce The Note In Foreclosure, Chapter 13 Bankruptcy, and Loan Modifications: Learn the Discovery Rules!

If you’ve read my prior posts on using the lack of standing defense where an assignee/new lender may not have possession of the original note, you may be wondering how to actually apply this defense.

It’s relatively simple although always best to have an attorney handle this. In foreclosure, which is litigation in the Supreme Court in New York, the usual disclosure (discovery) rules apply. Once you serve your answer with defenses (and possibly counterclaims), the homeowner/defendant has the right to seek disclosure. The lender’s attorney will try to prevent this by filing a motion for summary judgment and arguing that disclosure is unnecessary. A homeowner’s lawyer can try to prevent this by serving a notice for discovery and inspection (aka a request for documents). New York litigators call this a “D&I” or just “DI” for short. In the request list you can seek production of the original note. If it is not provided, this may create a defense to summary judgment because it will raise a disputed triable material issue of fact. Now, if you are a homeowner shaking your head and shrugging your shoulders because you don’t really get what I just said, that’s ok. That’s because you should never attempt to litigate or handle foreclosure resolution without a qualified attorney. There are many pitfalls.

So, if you’ve served your “D&I” but have not received a response, the next step is a good faith attempt to seek the cooperation of lender’s counsel. If that is not given, defense counsel may seek a preliminary conference with the court and obtain an order with real deadlines. It seems in New York that until there is actually a preliminary conference order, that the D&I alone is not enough to support a subsequent motion to compel production of documents. But once you have the order you can file your motion and possibly include a motion to preclude (which means to prevent the other side from submitting proof). You may, for example, seek to preclude evidence on the issue of standing based on the lender’s non-compliance with the court order and the notice for D&I. Better yet, the homeowner may even have grounds to move to dismiss on the ground that the lender lacks standing.

If you are seeking a loan modification and are currently in foreclosure, your attorney can also use these tools to create leverage in the negotiation.

If you are in Chapter 13 bankruptcy, discovery is permitted under Rule 2004 and also within the context of adversary proceedings and contested matters.

If you are an attorney, learn the discovery rules in state and federal court and you will know how to use the standing/produce the note defense in most contexts.