The lesson of a new case is in the title of this alert, although some discussion will better explain its practical significance. [See, Tuthill Finance v. Abundant Life Church, U.P.C., 122 A.D.3d 918, 998 N.Y.S.2d 387 (2d Dept. 2014).]
As dedicated readers of our alerts will know – indeed anyone involved with servicing will be aware of this – “standing” is the hot-button issue of the mortgage foreclosure case (certainly in New York). Borrowers some years ago came to recognize that challenging the foreclosing party’s ownership of the note and mortgage is an ideal way to slow up the action and might even be successful if the lenders and servicers in the chain of assignments were anything less than perfect in preparation of the documentation. Exacerbated by the role of MERS, allonges not stapled to notes, missing assignments, mortgage documents delivered after an action is begun, there are yet other standing related incidents which can greatly delay or even lead to dismissal of a foreclosure action.
We have reviewed many of these in prior alerts, and the goal here is not to offer a primer on all the aspects of law regarding standing. But the new case does focus upon a particular principle that is worthy of this brief explanation.
A mortgage can be efficaciously assigned by delivery of the note and mortgage (actually the note alone will suffice) without necessity for a written agreement. An assignment in writing should be preferred for any number of reasons, not the least of which is clarity; the mortgage holder then should not have to prove the actuality of delivery of the mortgage documents which can become an elusive task, especially with the passage of time.
It follows then that the recording of an assignment of mortgage prior to initiation of the foreclosure is not required. After all, there need not have been a written assignment in the first place so there could not be an obligation to record what does not exist. Even if there is a written assignment, and even though it can (and as recommended should) be recorded, it is simply not a requirement.
Now to the little twist in the new case.
Among other things, the borrower claimed that the foreclosing plaintiff’s assignment of mortgage had been backdated and that the borrower was entitled to a hearing on this supposed issue. In addition to finding no merit to such an assertion (it was apparently just manufactured) the court also observed the meaningful point which launched this alert.
So long as the plaintiff can establish its standing as an assignee of the mortgage prior to commencement of the foreclosure – whether by written assignment or physical delivery – that a written assignment of mortgage may be recorded after the action is begun does not defeat standing.
It is a concept to know.
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.