We are wont to say, regularly, that lenders need not be told about the perils of the statute of limitations on a mortgage in New York, although we nonetheless comment upon it with equal regularity. The mishaps are many and there is always room for a missing endorsement or a misplaced or un-affixed allonge, among any number of other miscues which can torpedo a declaration of standing.
A new case, however, adds a twist which is very helpful to a mortgage holder and may in more than a few cases preserve standing even if it might otherwise be faulty. [Wells Fargo Bank, N.A. v. Graffioli, 167 A.D.3d 969, 90 N.Y.S.3d 224 (A.D. 2d Dept. 2018)].
It is well recognized that mortgage modifications are commonplace. Whether they are entered into more often prior to a foreclosure being initiated or afterwards is a statistic to be left to others. In the new case there may indeed have been an issue as to standing. However, the assignee of the mortgage and the borrower had, well before the foreclosure was instituted, entered into a mortgage modification agreement.
In that regard, and quite critically, the court ruled that the mortgage holder established that the modification agreement created a direct contractual relationship between that mortgage holder and the borrowers relating specifically to the subject promissory note and the mortgage. Further, the court found that by entering into the modification agreement, and making monthly installment payments pursuant to that agreement, the borrowers expressly acknowledged the plaintiff’s status as the holder of the subject note and mortgage well before the commencement of the foreclosure action.
Therefore, contrary to the borrowers’ contention, the plaintiff had thereby established its standing to maintain the action.
The helpful new lesson, then, is that a pre-foreclosure modification agreement may very well serve to cure a standing infirmity. It is a point to remember.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2019), 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.