Can I Sue Using "Split the Note" Theory And Save My House in Houston from Foreclosure?

No, at least not here in the 5th Circuit.

The "split the note" theory is when a mortgagor (the borrower in a mortgage transaction) claims that the foreclosing lender does not have authority to foreclose because it possesses only the deed of trust and not the underlying note. In order to foreclose, the theory goes, a party must hold both the note and the deed of trust.

Texas is in the 5th Circuit, and the 5th Circuit has ruled that the "split the note" theory is unsupported by Texas law:

Specifically, the 5th Circuit Court of Appeals in Wiley v. Deutsche Bank National Trust Company, Court of Appeals, 5th Circuit 2013, demolished the "split the note" theory, holding that

"the `split-the-note' theory is . . . inapplicable under Texas law where the foreclosing party is a [mortgagee] and the mortgage has been properly assigned. The party to foreclose need not possess the note itself." (citation omitted). So long as it is a beneficiary named in the deed of trust or an assign, that party may exercise its authority even if it does not hold the note itself. That is contemplated in the deed of trust and by the statute allowing mortgagees and mortgage servicers to foreclose.See TEX. PROP. CODE § 51.0025.

J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization