In the case of a lost promissory note, the note holder is not the only one at a loss. Legally, an investor cannot purchase a note without an original copy of that document.
So, what can be done? Can you continue selling your note with a lost document?
With the help of a title company, closing attorney, or broker , this transaction can still legally take place and can happen in a timely manner.
1. The note holder will need to file for a replacement note. Once this happens, it will need to be signed by the note holder as well as their payor. It is important to keep in mind, however, that the payor does not have any obligation to sign this document and they may refuse to do so. As a rule of thumb, in the world of an investor, if the payor refuses to sign the replacement promissory note, it’s likely that the investor will walk away from the deal. Without the signature of the payor, the investor will not have any right to initiate a foreclosure, if that is necessary.
2. The note holder will need to collect a Lost Note affidavit. This is a description of the situation behind the lost note and the steps that have been taken to locate it. The note holder will need to sign this in front of a notary public that states the replacement note supersedes the lost note. The note holder can expect an indemnification to be prepared as well, which simply states that if the lost note is found, it is to be immediately given to the preparer of the affidavit.
3. You can proceed with selling your note. Once it closes, the investor will likely choose to place the documents with a secure, third-party servicing company, which is already highly recommended.