Standing in the Wake of the Foreclosure Crisis: Why Procedural Requirements are Necessary to Prevent Further Loss to Homeowners

Timothy Froehle The University of Iowa College of Law, Iowa Law Review, Forthcoming


In the current fallout from the foreclosure crisis and the securitization of mortgages, an old procedural doctrine is becoming increasingly relevant to homeowners facing foreclosure. The doctrine of standing is surfacing in the contexts of judicial foreclosure and bankruptcy proceedings as a defense to the foreclosing party’s right to foreclose. Defendants and debtors are affirmatively compelling lenders to produce evidence of ownership of the underlying note and mortgage, and lenders are increasingly falling victim to the same haste and lack of foresight that led to the crisis.

Additionally, courts are beginning to raise these issues on their own, a sign that they are inclined not to allow lenders to foreclose without properly protecting the homeowners at risk. This protective stance, however, fails to reach the homeowners whose foreclosures occur outside the judicial system. Numerous defects in standing and ownership of the mortgages pass through non-judicial foreclosure without any scrutiny, and homeowners’ interests in retaining ownership of their property will continue to suffer unless legislators respond with laws requiring proof of ownership of the loan before foreclosure.

Keywords: Foreclosure, Standing, Mortgage Backed Securities, Real Party in Interest, Non-Judicial Foreclosure, Promissory Note, Civil Jurisdiction

JEL Classifications: K10, K11, K12

Accepted Paper Series

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