Given all the roiling and confusion about MERS and the issue of standing, who can actually be the plaintiff in a mortgage foreclosure action is becoming a pointedly elusive subject – certainly in New York. And the principle that the foreclosing plaintiff must be the owner and holder of the note and mortgage just makes the concepts more slippery.
All this might suggest that any hope a mortgage servicer could initiate a foreclosure action in its own name would be forcefully banished. Not so, confirms an important new case. [CW Capital Asset Management LLC v. Charney-FPG 114 41st Street, LLC, 84 A.D.3d 506, 923 N.Y.S.2d 453 (1st Dept. 2011)].
First, there has been case law in the past for the proposition that under appropriate circumstances, a mortgage servicer can be the party plaintiff in a mortgage foreclosure action. [See Fairbanks Capital Corp. v. Nagel, 289 A.D.2d 99, 735 N.Y.S. 2d 13 (1st Dept. 2001)].
But what about in today’s unusual climate? The new case instructs that the rule is assuredly still good. Yes, a foreclosing plaintiff generally must demonstrate that it is the owner of the note and mortgage – and a mortgage servicer for the actual mortgage holder could not be in that category. However, a servicer can nonetheless have standing to initiate a foreclosure action where the complaint identifies the actual holder of the note and mortgage, expressly recites the plaintiff’s role as a servicing agent, and shows that an agreement has delegated authority to the servicer to act as plaintiff.
Doubts are and will continue to swirl about in the mortgage foreclosure arena but this maxim can be said to be established: A lender can designate a servicer to be the plaintiff in a foreclosure action.
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.