When finally a foreclosure action ends with a sale – the auction – all is not quite finished because of course there must be a closing. That process is often bedeviled with claims by the bidder that there are exceptions to title. The difference between the quality of title promised to devolve through a mortgage foreclosure and what a title company will insure is a much larger and more complex subject than what we address here. Rather, this focus is on marketable title, how that is defined with mention of a not uncommon concern about marketability – all not nearly as complicated as it might sound.
While it is reasonable to say that real estate sales generally convey an “insurable” title, the title coming through a foreclosure sale is generally required to be a good “marketable” title.
A new case [Saxon Mortgage Services, Inc. v. Coakley, 145 A.D.3d 699, 43 N.Y.S.3d 97 (2d Dept. 2016)] recites established principles, worthy of emphasis here. That case reaffirms, as just mentioned, the general rule that the purchaser at foreclosure sale is entitled to a good marketable title. The definition of a marketable title is one free from reasonable doubt, but not from every doubt. Indeed, something more than a mere assertion of a right is essential to create an unmarketable or doubtful title.
In the noted case, a bidder claimed that there was some infirmity in the chain of assignments into the foreclosing plaintiff. He thereupon sought to adjourn the closing date and to compel the plaintiff to record corrected mortgage assignments. The trial court denied this motion and the appellate division affirmed, finding that the bidder failed to demonstrate that the referee could not convey a marketable title.
Specifically regarding assignments, the key point here was that a main reason the bidder failed in its burden to assault the marketability was that the former owner and mortgagor of the property was himself barred from challenging the judgment of foreclosure and sale on the basis of any alleged irregularities in the assignments of the mortgage. Because the defendant borrower would be unable to assail the action, the judgment of foreclosure and sale was final and the quality of title was essentially assured.
Claims of lack of marketability can, of course, assume many forms and each would have to be assessed on a case by case basis, given the rules of defining marketable title. This case, however, makes the interesting point about possibly defective assignments and their relationship to the borrower not in a position to attack the sale.
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.