Do “Custodians”Really Hold “Original Notes?”

Disclaimer: This article is not a legal opinion nor should it be construed as legal advice. Seek the opinion of a licensed attorney in your jurisdiction regarding the use and relevance of this information.

 

The following is an example of a typical case where the servicer for “XYZ Trust” attests or certifies that the Plaintiff trust is in possession of the “original note” at the commencement of the foreclosure action. These certifications rarely, if ever, come from the actual custodian(s) named in the trust agreements, where it is represented and warrantied that the custodian(s) received the “original” notes and collateral files at or near the time of the trust’s closing date. 

 

As an investigator, I continue to point to the gaps in the custodial history of the notes – the chain of custody. How can a servicer boarding a new loan in 2019 claim the note is an “original” when they can’t explain where the note has been since 2005, or who has had possession of it for the past 14-years?

 

Here is a letter from “U.S.Bank” as the Custodian for the “BAFC 2006-H” trust dated 2013. This letter is in response to a subpoena seeking information as to the custody and possession of the “original note.” The letter states, “As custodian, U.S. Bank typically maintains copies of the original collateral file, i.e. note, mortgage, and title policy.”

 

Now, let’s look at this particular trust’s conveyance language in the PSA:

Section 2.01 Conveyance of Mortgage Loans.

 

     (b) In connection with such transfer and assignment, the Depositor has delivered or caused to be delivered to the Trustee, or a Custodian on behalf of the Trustee, for the benefit of the Certificateholders, the following documents or instruments with respect to each Mortgage Loan so assigned:

          (i) the original Mortgage Note, endorsed by manual or facsimile signature in the following form: “Pay to the order of U.S. Bank National  Association, as trustee for holders of Banc of America Funding Corporation Mortgage Pass-Through Certificates, Series 2006-H, without recourse,” with all necessary intervening endorsements showing a complete chain of endorsement from the originator to the Truste[e.]

 The wording used by U.S. Bank is very clear. It does not state that U.S. Bank as custodian typically holds the “original” collateral files, it states “copies.” This is why you never see any executed trust certifications that the notes were delivered, and received, by the trustee custodian(s), or will ever see anyone from U.S. Bank swear under oath that it received, and has maintained, possession of the original notes on behalf of any trust. The fact is, no one has any personal knowledge as to the whereabouts of the so-called “original notes” other than those who originally scanned the documents into a computer system and then systematically destroyed them. It’s all similar to the childhood game “Button, Button, Who’s Got The Button?” Only, it’s the servicer swearing under oath that the custodian has the button, while the custodian stands silent with nothing in its hands. It’s nothing but pure phony, uncorroborated hearsay.