June 7, 2013
by Bruce J. Bergman
Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. – USFN Member (New York)
The subject of standing will not go away. All of the publicity and controversies of recent years have energized borrowers to claim, almost as a matter of course, that the foreclosing party did not really own or hold the note before the action was begun, upon which basis it is asserted that the plaintiff lacks standing. While most often this will be an unfounded defense, lender/servicer miscues can provide defaulting borrowers with a ready-made defense. A recent case jarringly instructs. [Deutsche Bank National Trust Company v. Haller, 100 A.D.3d 680, 954 N.Y.S.2d 551 (2d Dept. 2012)].
The end result of this case was that summary judgment was denied the foreclosing party because it could not demonstrate standing, although as icing on the cake, nor could it prove that it mailed the (Fannie-Freddie uniform instrument) mandated thirty-day notice.
Helpfully, the court recited some standing concept basics. They are worthy of recitation here, certainly as an aid to appreciate the decision:
• Where standing is made an issue by a defendant, the plaintiff must prove its standing to be entitled to relief.
• A foreclosing plaintiff has standing when it is the holder or assignee of both the note and the mortgage at the time the action is commenced.
• The mortgage obligation is transferred either by written assignment or physical delivery of the note before the action is begun.
As readers will recognize, an assignment of the mortgage is usually and most readily accomplished and established by a written assignment. There was an assignment in this case and it was to the plaintiff, but signed by “Ameriquest Mortgage Company: by CitiResidential Lending, Inc. as attorney in fact.” No evidence was produced, though, as to Citi’s authority to sign the assignment. A power of attorney would have been fine, the court said, but none was produced. With the court finding a question of fact on the legitimacy of the assignment, it could not grant summary judgment.
Endorsement of the note to plaintiff could solve the problem but, while the note was indeed endorsed, the endorsement was undated. Therefore the court could not determine whether that had occurred before the foreclosure was begun. Thus, the servicer could not be rescued by this.
Of course, as noted, physical delivery of the note puts all this to rest. But that could not be proven either. Plaintiff’s servicing agent submitted an affidavit in support of the delivery assertion but offered no factual details about the physical delivery. Therefore, this too was insufficient to establish physical possession of the note before the action was begun.
So the mortgage holder failed in all of its attempts to demonstrate standing. It was thus required to go through time-consuming and expensive discovery, or a trial, or at the very least, another attempt at summary judgment. Avoiding this scenario suggests care in the assignment process.
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