By Michael Vosilla
Senior Associate
Senior Associate
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It is important to remember the distinctions between mortgages and promissory notes. Although they are often signed simultaneously and appear to go “hand in hand” with each other, there are important differences. Most notably, is that a promissory note is a promise to repay a loan, and a mortgage is a security interest that makes the promissory note enforceable against real estate (in a certain priority to other creditors’ claims). Losing one of the two documents can be a disaster for creditors. For instance, losing the mortgage can make a loan completely dischargeable in bankruptcy proceedings, or just as bad, make the loan completely uncollectible due to state Homestead protections. Losing the promissory note on the other hand, can make even a properly recorded mortgage completely worthless, as the mortgage is only as good as the promissory note it purports to enforce. In conclusion, if you are a lender, never forget the importance of preserving the promissory note where it can be readily located later. And if you are a homeowner facing foreclosure, ask the lender to show you both the mortgage and promissory note. Thanks to shoddy record keeping by lenders in the last decade, such a request could save your home
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