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New York’s Highest Court Rules on Standing to Foreclose

Posted By USFN, Tuesday, September 1, 2015
Updated: Saturday, September 26, 2015

September 1, 2015


by Jacqueline Fink
Druckman Law Group PLLC – USFN Member (New York)

On June 11, 2015 the New York Court of Appeals upheld a lower court decision granting summary judgment in favor of the plaintiff, holding that Aurora Loan Services, LLC had standing to foreclose. Aurora Loan Services, LLC v. Taylor, 25 N.Y.3d 355, 2015 N.Y. Slip Op. 04872 (2015).

Defendant Taylor executed a note dated July 5, 2006 to First National Bank of Arizona, as well as a mortgage to MERS as nominee for First National Bank of Arizona. Pursuant to a pooling and servicing agreement (PSA), the loan was made part of a mortgage-backed trust whereby Deutsche Bank Trust Company, as Trustee, became the owner of the note. An allonge to the note provided a chain of ownership from First National Bank of Arizona, through a few entities, and ultimately to Deutsche.

Pursuant to a master servicing assignment and assumption agreement (MSAAA) dated March 10, 2008, Aurora assumed servicing obligations under the PSA on April 1, 2008. On August 13, 2009, the mortgage was assigned by MERS to Aurora. Taylor defaulted under the terms of the note and mortgage by failing to make the payment due on January 1, 2010. By power of attorney dated May 14, 2010, Deutsche granted Aurora the right to perform acts in the trustee’s name, including the execution of foreclosure documents. On May 20, 2010, Aurora took physical possession of the note. A foreclosure action was commenced by Aurora Loan Services, LLC on May 24, 2010.

The defendant asserted that Aurora did not have standing to foreclose as Aurora did not have possession of the mortgage at the time the action was commenced. The Court of Appeals, however, rejected this argument, citing Bank of N.Y. v. Silverberg, 86 A.D.3d 274 (2d Dept. 2011). Once a note is transferred, “the mortgage passes as an incident to the note” The converse regarding physical transfer of the mortgage prior to commencement is irrelevant to standing. “The note, and not the mortgage, is the dispositive instrument that conveys standing to foreclose under New York law. In the current case, the note was transferred to Aurora before the commencement of the foreclosure action — that is what matters.” Aurora Loan Services, LLC v. Taylor, 25 N.Y.3d 355, at 366.

While some lower courts still require valid assignments of mortgages to substantiate standing, the Taylor holding should provide an argument to plaintiffs unable to produce an unbroken chain of assignments. Additionally, this recent ruling confirms the importance of having possession of the note prior to the commencement of a foreclosure action, by upholding that a non-owner holder with delegated written authority and physical possession of the note has standing to foreclose.

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