Mortgage holders and mortgage servicers are typically alert to the problem or possibility of a forged mortgage. It can be a slippery world out there. But the corollary fear is the forged deed, a point emphasized in a new case, Cruz v. Cruz (Long Beach Mort. Company), 37 A.D.3d 754, 832 N.Y.S.2d 217 (2d Dept. 2007).
Here is the brief fact pattern which tells the story and highlights the legal principle you should know. A property owner died (without a will) survived by six children who thereby all became co-owners of the property. One of the surviving children executed a deed, conveying the entire premises to himself, claiming to be the sole heir. He then obtained a mortgage loan on the premises, claiming to the sole heir. He then obtained a mortgage loan on the premises from a lender (and later died, although that wasn’t important to the case).
The legal point emerging from these facts is that a deed based on forgery – or obtained by false pretenses – is void from the very beginning and so a mortgage based upon such a deed is similarly invalid. Therefore, it was proper to cancel both, the deed and the mortgage obtained under false pretenses.
The only possible saving grace for the lender here was that it might have the equitable right to claim advances it made for the premises – such as for insurance and taxes – but those advances would have to be proven. In New York, one reason to have title insurance (and mortgage insurance on the mortgage) is that protection is afforded for forgeries and other chicanery. None of this changes the underlying concept, though, that if the deed is a phony, the mortgage based upon that deed is itself no good.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.