I won't get into the "shredded" aspects of this, but having worked for a mortgage servicing company, they weren't "shredded" they were imaged and stored electronically. Paper copies were supposed to be stored for legal archive purposes for the life of the loans + 7 years as required by law. (Some states vary, but that's typically been the rule.)
What some are taking issue with is that when challenged in court to provide *original* copies of mortgage contracts, deed documents, etc.. many of the 2nd and 3rd holders of mortgages cannot easily do that. They can provide original scanned images of the documents, but not the original, physical paperwork itself. Some have used this as an 'excuse' to not pay their mortgages to try and win the 'free house lottery' in the Court system. Others have used this as a delay tactic to keep from being evicted from their homes (as noted in an above post.)
The Courts will have to set and enforce a standard under which Banks, Servicing Companies or other mortgage note holders will have to meet in the future to foreclose or clear title. Most states already have processes in place to deal with this (again as noted in an above post.)
No, they were shredded. As in a truck came by to the document facility with a commercial shredder in the back and they were ground up:
Fixing the paperwork won't be easy because many of the notes have been lost or even deliberately shredded. The Florida Bankers Association told the state Supreme Court last year that in many cases, "the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file."
http://realestate.msn.com/article.aspx?cp-documentid=26298395
Thousands of counts of perjury have been committed by sworn affidavits of lost note. But that was just the desperate bank's fraud to cover up other frauds at origination, underwriting, rating, packaging, assigning, tranching, servicing, etc., etc.
As I said, when are the frog marches starting?
When I “refinanced” with Wachovia around 2002 (it was actually a new loan because we owned free and clear at that point), Wachovia came back and told us we didn’t have clear title, but they were going to make the loan and close the deal anyway. They said there would be some kind of special clause added to the title insurance. It seemed like a ho-hum snafu, but I needed to clear things up with my old lender. Being told I didn’t have clear title annoyed me.
I made some calls to my (paid-off) mortgage servicer, Atlantic Mortgage, and was told that I needed to talk to ABN AMRO. I finally pushed enough buttons on my phone to get ahold of somebody named Alyson Wright, and was told that they had received the unrecorded satisfaction piece I had mailed to them the previous week and would send it to my county for recording. (I have no idea why I had an unrecorded satisfaction piece, but I believe it was sent to me by Atlantic shortly after we made our final payment.) She told me it would take ~90 days for them to get the paperwork rolling because they have “a microfilm process”. It could then take the county 3 months or so to get the now-recorded “satisfaction piece” back to me.
My new loan with Wachovia was closed and so I forgot all about it (but I kept my file and notes and copies of EVERYTHING for future reference, of course). About 9 months later I received a recorded satisfaction piece in the mail. God only knows whatever happened to the original note. I recall thinking that all parties involved were confused in general, and maybe overwhelmed by the sheer volume of new business. Wachovia’s nonchalance about closing my very favorable (for me) mortgage despite a cloud on my title left me thinking that all these banks must be swimming in the same cesspool.
I have since refinanced that Wachovia loan with somebody else and there (apparently) is no longer any issue with my title.