Lost paper trail allows borrower to ignore $460,000 mortgage debt

A White Plains, NY federal court eliminated a woman's $460,000 mortgage debt because the paper trail was so messy that the mortgage lender couldn't prove that it actually owned the debt.

In March, PHH Mortgage filed a proof of claim to the debt noting that it was owed $461,263, which included more than $30,000 in past-due payments. The homeowner's lawyer sought to have the loan modified, but after the bank dragged its feet, as the lawyer described PHH's actions to the [New York] Times, the lawyer asked PHH to prove its claim.

Unable to do so to his satisfaction, Judge Drain ordered the debt expunged, concluding that PHH had failed to show it had been assigned the mortgage.

The case is being appealed by PHH, but even if the homeowner remains victorious, there remains a problem for her: Without a clear title, the homeowner will likely have difficulty selling her home if she chooses to do so.

Who owns your home? Lost paper trail allows borrower to keep her house