A lot of foreclosure defense has been riding on the "show me the note" argument, namely, "Hey bank, where's the promissory note you claim is evidence of the debt?" The state courts and the federal district courts have been quite loose on this and generally allowed the banks to proceed with little more than a shoeshine and a smile, but the bankruptcy courts have tended to be stricter. The reason is inherent in the nature of bankruptcy: Note issues come up normally in two situations, claims and motions for relief from stay, and in both the claimant (the bank) has a stricter burden of proof than in nonbankruptcy proceedings. Now that fact has been writ large courtesy the Tenth Circuit Court of Appeals in In re Miller. The Tenth Circuit, reversing the bankruptcy court and the Bankruptcy Appellate Panel, holds essentially that, if you want to come to the table as a note holder, you'd better be holding the note.
This approach is perfectly reasonable and long overdue. There is an issue that remains open, though. The Tenth Circuit, as with every other court I've seen address the issue, relies on UCC Article 3 to determine if the claimant is in fact the holder of the note. There is a growing debate, though, concerning whether standard mortgage notes qualify as negotiable instruments under Article 3. If they do not, then Article 3 does not apply, and we must look to other law to determine who holds the note. Stay tuned, we may have this all sorted out in 10 or 12 years.