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North Carolina Supreme Court Fails to Uphold Foreclosure Proceeding Protections

AARP's brief, filed by attorneys with AARP Foundation Litigation, urged North Carolina's highest court to uphold the letter of the law in foreclosure proceedings, pointing out the spike in wrongful foreclosures when important procedural protections are not observed. Without a written opinion, the court upheld a lower court's disappointing decision.


The recent collapse of the housing market and resultant flood of foreclosures has led to borrowers' rights swept aside by paperwork that does not always comply with the law.

In North Carolina, a major lender's failure to follow two fundamental elements was challenged. At issue were (1) the definition of who can enforce a note in foreclosure actions, and (2) what must be included in a valid affidavit when a lender seeks to enforce a note.

On the first point, the homeowner argued that the lender must comply with state law and produce the original note in court in order to act upon it, rather than a photocopy. The requirement is not a mere technicality, because in this case as in many others there appear to be defects — for instance, a signature appears to be fabricated in the photocopy of the note presented in court. Producing an original note would clear up the issue once and for all. Production of the original document is important because in many instances, several lenders have stepped forward to enforce the same note and it has turned out that homeowners have actually been current in their payments to the correct lender at the time foreclosure was initiated.

As for the second point, the affidavit that supported the foreclosure in this case declared under oath that the affiant (a mortgage service employee) is familiar with and has personal knowledge of the account. However, record evidence shows there is no way that is possible in light of her employment history dates. AARP's brief argued that affidavits and other documentation supporting a foreclosure judgment must comply with the rules of evidence that apply in all other cases, including the requirement that witnesses have personal knowledge of the matters they attest are true.
AARP and six other organizations filed a "friend of the court" brief detailing the widespread abuses in the mortgage servicing and foreclosure industry and noting that as people face a bewildering and frightening process that could lead to the loss of not only their greatest asset but also the place they call home, it is important that this process be governed by the rule of law and so that their rights are protected.

Based on the evidentiary problems and doubts about what company actually owned the Dobson note, the trial court entered an order permanently prohibiting the lender from foreclosing. However, a North Carolina appeals court reversed this ruling, finding there was sufficient evidence that Wells Fargo owned the note and that its account of Dobson's mortgage history was reliable. Without comment, the Supreme Court upheld that ruling.

What's at Stake

With the overwhelming increase in foreclosures, there have been alarming shortcuts in the process, to the point that fraudulent practices now threaten to actually become the norm. While North Carolina is a state that has been particularly hard hit in the foreclosure crisis, it is by far not the only state concerned by these practices. State attorneys general and/or state courts have opened investigations in California, Michigan, New Jersey, Delaware, New York, Illinois and other states.

Case Status

Dobson v. Wells Fargo Bank Minnesota, N.A. was decided by the Supreme Court of North Carolina.