Angela Brock borrowed $544,000 and signed a note payable to Amerifund Mortgage Services, LLC, to buy a house in Silver Spring, Maryland. The note was endorsed in blank and transferred several times "without recourse" before Brock fell behind on the payments. On behalf of Deutsche Bank National Trust Co., BAC Home Loans Servicing LP initiated foreclosure. Brock filed an action in a Maryland state court to block it, arguing that BAC could not foreclose because Deutsche Bank, not BAC, owned the note. Can BAC enforce the note? Explain why or why not.
Answer (2)
In this scenario, the issue revolves around whether BAC Home Loans Servicing LP (BAC) can enforce the mortgage note against Angela Brock in the foreclosure process. To determine this, we must consider principles of negotiable instruments and the 'holder' status.
Negotiable Instrument : The note that Angela Brock signed is considered a negotiable instrument, which is a formal, written promise or order to pay a fixed amount of money that must be transferable in the commercial paper form.
Transfer and Endorsement : The note was endorsed in blank and transferred several times. An endorsement in blank makes the note bearer paper, which means any holder of the note can enforce it without needing to specify whom they represent.
Without Recourse : The note was transferred "without recourse," which generally means that the seller of the note is not responsible if the borrower defaults. This term does not affect the ability of the holder to enforce the note, only the seller's responsibilities regarding it.
Holder in Due Course : For BAC to enforce the note, it needs to either be the 'holder' or have the rights of a holder in due course. BAC, acting on behalf of Deutsche Bank, needs to have physical possession of the note to be considered the holder.
Can BAC Enforce the Note? : If BAC can demonstrate that it has physical possession of the note endorsed in blank, it can enforce it. The possession of the note allows BAC to initiate foreclosure proceedings, regardless of whether Deutsche Bank is the formal owner. This is because possession confers the right to enforce under the Uniform Commercial Code (UCC).
Therefore, BAC Home Loans Servicing LP has the right to enforce the note and initiate foreclosure proceedings against Angela Brock, assuming they can prove possession of the endorsed note.
BAC Home Loans Servicing LP can enforce the mortgage note against Angela Brock if it can prove it holds the endorsed note. The possession of the note allows BAC to initiate foreclosure proceedings. The endorsement in blank means any holder can enforce the note, regardless of who officially owns it.
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