CA Judge: HELOC Notes Are Not Negotiable Instruments — Possession Is Not Enough — Pretender Lenders Must Prove the Debt and Ownership

Livinglies's Weblog

Here we have a ruling that firmly states the obvious, with widespread ramifications. HELOC (Home Equity Line of Credit) promissory notes represent evidence of a debt depending upon how much the homeowner borrows, repays or otherwise receives advances. It is not a promise to pay a single unqualified amount of money.

While the mortgage or deed of trust on the primary mortgage carries with it obligations to pay variable sums, the promissory note does not, which is why judges treat the note as a negotiable instrument if it is valid on its face.

What you are going to see is that the HELOC is left out of foreclosure because the pretender lender cannot prove the debt or its ownership. If the HELOC and the primary mortgage involve the same pretender lender, then discovery on the HELOC is relevant both because the HELOC might convert the first mortgage from a purchase…

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