This issue arises frequently and so we have written on about it on a number of occasions. It is typically associated with the sale (i.e. assignment) of a mortgage, which can readily happen during the course of a mortgage foreclosure action. In the latter instance, because there is a new holder of the note and mortgage, need the caption be amended to show the new holder and – a bizarre inquiry in a new case [Wells Fargo Bank, N.A. v. Hudson, 98 A.D.3d 576, 949 N.Y.S.2d 703 (2d Dept. 2012)] — does a foreclosing plaintiff lose standing by virtue of the assignment? Absolutely not! This is pursuant to CPLR §1018 and all the case law. [For further review see our alert of November 15, 2011 and 2 Bergman on New York Mortgage Foreclosures §23.46, LexisNexis Matthew Bender (rev. 2012)].
Yet again, though, the trial court ruled the other way and dismissed the foreclosure for supposed lack of standing! It took the time and expense of an appeal to remedy the error.
Here, the note and mortgage were executed and delivered to Wells Fargo Bank. That mortgage holder began a foreclosure in October 2006 and the case proceeded to appointment of a referee to compute as of June, 2007. In November, 2009, more than two years later, the plaintiff (Wells Fargo) assigned the mortgage to EMC which then assigned to yet another entity. (All this is, as readers will recognize, quite typical.)
By August, 2010 when the referee’s report of amount due was filed, the plaintiff (the action was encaptioned with Wells Faro as the plaintiff although a new entity held the note and mortgage) moved for judgment of foreclosure and sale. But upon oral argument the defaulting borrower appeared pro se, advised the court that the note and mortgage had been assigned (so what?), and called for dismissal of the foreclosure action upon the ground that the plaintiff had no standing. The trial court agreed and the foreclosure was dismissed.
But of course, such a ruling is clearly violative of the status of the law – and the appeal court so ruled. The latter stated that the plaintiff had standing to begin the action in 2006 as the holder of the note and mortgage and it did not lose that right to continue the action by later assigning the note and mortgage. To be sure, if any party or the court requests that the caption be changed to reflect the new owner of the mortgage, that should proceed, but that was not the case here. Therefore, it was an error to dismiss the complaint.
The mortgage holder wins, but again at the cost of having to pursue an appeal to obtain that to which it was always entitled.
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.