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North Carolina's Supreme Court heard arguments Monday in a case that could decide whether mortgage lenders can foreclose on a home without producing original documents that prove they're owed the money.
The hearing - in a state traditionally friendly to banks and home to U.S. industry leader Bank of America - comes as paperwork problems have gummed up foreclosures nationwide.
Those problems include missing documents validating a mortgage transaction and unqualified employees "robo-signing" affidavits swearing to the accuracy of overdue mortgage debts.
The case came before the state's high court after years of an active secondary market, which saw lenders loosen standards, then combine thousands of mortgages into securities that were then sold to investors who might buy a slice of the new financial instrument.
The court heard from attorneys representing Wells Fargo and a Duplin County homeowner whose $50,000 loan was transferred to a series of secondary financial companies. Lawyers for Linda Dobson of Magnolia argued that Wells Fargo and its affiliates can't foreclose on her home without producing the original promissory note proving they're due the debt, something they haven't done after more than three years.
Wells Fargo attorney John Mandulak said it hasn't produced the original loan documents yet, but might be able to do that if the court agrees to revive its case and send it back to a lower court for trial. Mandulak said photocopied loan documents and sworn statements from employees that it is truly owed the money are sufficient.
