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Can I Shed My Mortgage?

The answer to this question depends entirely on your situation. You may be able to prevent foreclosure and get rid of your mortgage at the same time by investigating who exactly owns the mortgage and holds the promissory note for the loan. And you may be able to drop a second mortgage entirely if you owe more on the house than it is currently worth.

If you are already in foreclosure proceedings, you should demand that the bank produce proof of ownership of your mortgage. To foreclose on a home, a bank or other creditor must be able to produce the promissory note that goes with the mortgage to show their ownership of the debt. If they cannot produce that note, which is sometimes the case, they cannot foreclose on your home.

Alternatively, you could initiate an action to quiet title even before foreclosure proceedings begin. This is a lawsuit you initiate against the bank claiming to hold your mortgage loan to force the bank to prove that it owns the mortgage and holds the promissory note for the loan. If the bank cannot prove ownership, the house is yours, and you may keep or sell it without paying your former mortgage. Banks and other financial institutions lost many of these promissory notes during the housing boom.

Another way to get rid of a mortgage is through a Chapter 13 bankruptcy. If you bought your home during the housing boom and it has since lost value, it may be worth less than you owe on your first mortgage. If you have a second mortgage, bankruptcy law allows you to treat the second mortgage as an unsecured debt that you can discharge during your bankruptcy proceeding. This still leaves you with the first mortgage, but reduces the total amount you owe and the bankruptcy process should bring your monthly payments down to something more manageable. Consult with an experienced bankruptcy attorney for advice specific to your case.

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