U.S. Fifth Circuit Court of Appeals Rules Foreclosing in Texas Without the Note is Okay

As I understand it from talking with Texas foreclosure defense and bankruptcy attorney Gary Armstrong, of Armstrong, Kellett & Bartholow, the decision, coming from the 5th Circuit Court of appeals will be used throughout Texas as a legal precedent in federal courts, but will also likely be highly influential in Texas state courts as well.

So, the bottom-line is these arguments about how use of the MERS system resulted in splitting the note and creating multiple assignments and then the servicer failing to produce the note in order to foreclose will not fly in Texas. (You'll find a copy of the actual decision by the court below.)

Armstrong explained the same thing countless other foreclosure defense lawyers have explained... that the servicers will almost always try to have whatever the case is, moved into federal court, so now if that's successful, there's an appeals court decision that will be used to decide the case assuming it's brought on the same grounds. Because this is said to be an often used basis upon which Texas homeowners attempt to challenge foreclosure, this decision could have a widespread effect.

Specifically, the Fifth Circuit held that the split-the-note theory, "is inapplicable under Texas law where the foreclosing party is a mortgage servicer and the mortgage has been properly assigned," adding that, "the party to foreclose need not possess the note itself."''