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  1. #1

    Default How Does a Promissory Note Work for a Mortgage

    My question involves collection proceedings in the State of: Texas

    Can someone explain the journey a promissory note takes once you sign a contract on a home? You promise to pay the mortgage company ..... Then where does my ORIGINAL note go and what happens to it /them? What's the process the banks get their money for the home etc......

    Thanks

  2. #2
    Join Date
    Sep 2010
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    19,901

    Default Re: Promissory Note Journey

    The exact nature varies on the situation. Typically, you sign the note, a contract, that says you'll pay them back the money with interest. In addition, it provides for the attachment of security (the mortgage or a deed of trust) which is executed and filed wtih the land records office (typically the local courthouse). The bank remits the funds to whomever is handling the settlement and then that person remits the funds (to the seller and the seller's bank if there's still a note on that, among other places).

    When you mail in your payment, the bank takes it and uses it to pay the interest off that is currently due and then applies the rest to the principal.

    Now in this day and age two more things are likely to have happened. One is that the loan contract has been assigned (or if you would, sold) to another institution. You now owe paying that institituion for your loan. Another thing that happens is the lender may contract out the details of processing the payments (called the servicing). You'll send your money to the servicer who will do the book keeping and remit the funds in bulk (along with all the other accounts being serviced) to the lender.

  3. #3

    Default Re: Promissory Note Journey

    I will try to break my questions down pc by pc. When and If the bank sells your note to another and You now owe paying that institituion for your loan. Why should you still owe for your home? The new company already paid that debt. Where I m going with this is .... there really is no money exchanged only a promissory note. The bank gets their funds from the federal Reserve .... is this correct? So the bank has been paid in full for your mortgage. Now, I am paying the bank, the Federal Reserve paid the bank and NOW another institution has paid the bank ...... where is my relief and how is this either legal or lawful and there is a difference.

    Thanks for educating me and all reading

  4. #4
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    Jul 2010
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    Default Re: Promissory Note Journey

    Post hx...OP is one of those folks.

  5. #5
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    Oct 2014
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    8,238

    Default Re: Promissory Note Journey

    Quote Quoting larbec
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    I will try to break my questions down pc by pc. When and If the bank sells your note to another and You now owe paying that institituion for your loan. Why should you still owe for your home? The new company already paid that debt. Where I m going with this is .... there really is no money exchanged only a promissory note. The bank gets their funds from the federal Reserve .... is this correct? So the bank has been paid in full for your mortgage. Now, I am paying the bank, the Federal Reserve paid the bank and NOW another institution has paid the bank ...... where is my relief and how is this either legal or lawful and there is a difference.

    Thanks for educating me and all reading
    I see you’ve bought into another one of the, for lack of a better term, BS arguments that are advanced on certain fringe/alt web sites. You should be familiar with the old saying that you don’t get something for nothing. In your case, you don’t get a house for free with this argument. It should be apparent to anyone using common sense that such an argument would fail even without knowing the specifics of law.

    Where the lender (and not all mortgage lenders are banks, by the way; many mortgage lenders are not banks) gets the funds it uses to lend to you to buy the home is immaterial. The fact of the matter is that the lender provided to you the money you used to by the house. You signed a promissory note agreeing to pay the holder of that note back for the money provided to you to buy the house. If that promissory note is sold (assigned) to some other person or company, that person becomes the holder of the note and entitled to the payments you are obligated to make under the note. The fact that the original lender got paid does not matter. Your obligation is to pay the holder of the promissory note. whomever that is. That is how promissory notes work. The assignee of the note is also assigned the original lenders rights under the mortgage or deed of trust your executed, so if you fail to pay the holder of the note may foreclose on the mortgage or deed of trust to get paid. Trying to argue in court that the original lender was paid and thus you don’t owe the loan anymore will, once again, give the judge a laugh as he or she promptly dismisses that argument. That argument betrays a complete lack of understanding of promissory notes and how they work.

  6. #6

    Default Re: Promissory Note Journey

    free9man,

    What folks and I? My hoe and everything I have is PAID for FREE AND CLEAR with million$ in the bank. You do not know me. I ONLY want to know what is LAWFUL so when others ask I have an answer for them. A little too quick to judge

    @taxing matters

    Thanks for the clarification, what abut those banks that were all bailed out and what if they can NOT produce the note?

  7. #7
    Join Date
    Oct 2006
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    16,474

    Default Re: Promissory Note Journey

    Quote Quoting larbec
    View Post
    free9man,

    What folks and I? My hoe and everything I have is PAID for FREE AND CLEAR with million$ in the bank. You do not know me. I ONLY want to know what is LAWFUL so when others ask I have an answer for them. A little too quick to judge

    @taxing matters

    Thanks for the clarification, what abut those banks that were all bailed out and what if they can NOT produce the note?
    The banks that were bailed out have nothing to do with any one individual's promissory note. Why should they ever have to physically produce the promissory note? Please describe a scenario where you believe that would need to happen.

  8. #8
    Join Date
    Oct 2014
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    Default Re: Promissory Note Journey

    Quote Quoting larbec
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    @taxing matters

    Thanks for the clarification, what abut those banks that were all bailed out and what if they can NOT produce the note?
    Bank bailouts do not have the effect of canceling the loans the bank made. Those loans may still be enforced and collected as usual. All the bail outs did was rescue the lender from bankruptcy and required the banks to certain things (modify certain practices, repay the government, etc) in exchange for the cash they got. But the loans they made are still valid and collectible either by the bank or by whomever they sold the loan to.

    As for producing the note, if the holder of the note sues you on the debt, it must of course prove that it is the proper party entitled to get paid. If it cannot produce the note or other evidence that it is the owner of the loan then it will lose. It is possible that other evidence of the loan assignment would suffice rather than producing the actual note. The details of the loan agreement and the evidence available would matter. Each situation is a bit different and it is impossible to give a specific list of what evidence would be enough in every case. Some loan buyers are sloppy and don’t get or keep sufficient evidence to prove they own the loan and those creditors may fail to win their case in court.

    That’s quite a different matter, though, from making the losing argument that once the note is sold the home is paid for and the buyer cannot enforce the note. That argument is frivolous.

    A debtor being sued or foreclosed upon does always have the right to demand that the creditor prove to the court that the creditor is entitled to the judgment it seeks.

  9. #9
    Join Date
    Jul 2010
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    Default Re: Promissory Note Journey

    Quote Quoting larbec
    View Post
    free9man,
    What folks and I? My hoe and everything I have is PAID for FREE AND CLEAR with million$ in the bank. You do not know me. I ONLY want to know what is LAWFUL so when others ask I have an answer for them. A little too quick to judge
    No, I'm not. Anyone who buys into these crackpot theories, especially when there are plenty of sites out there that debunk them, and doesn't see the light is one of those folks. Pardon me if I'm not impressed by, and am skeptical of, your internet bragging about your alleged wealth.

  10. #10
    Join Date
    Mar 2013
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    18,340

    Default Re: Promissory Note Journey

    Quote Quoting larbec
    View Post
    free9man,

    What folks and I? My hoe and everything I have is PAID for FREE AND CLEAR with million$ in the bank.

    "Hoe"?

    I hope you meant home and not some cheap slut you picked up on the street.

    And if you did mean a home that is free and clear and you have millions in the back, then stop wasting our time with that "original note" BS that has been debunked countless times here and elsewhere.

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