More than probably any other type of litigation, the mortgage foreclosure case is threatened by process service problems (at least in judicial foreclosure states). And servicers know this for two reasons. First, they recognize how much time is often consumed at the beginning of the foreclosure case by service of process on the various defendants. Second, the basis of those all too common eve of sale orders to show cause is so typically the cry of “I was never served.”
Why is this a particular bedevilment in the foreclosure case? Two major reasons arise from the nature of a foreclosure action. Because it is necessary to extinguish all interests subject to the mortgage being foreclosed, there is no limit upon how many disparate persons and entities may need to be located and found – all the borrowers and owners, sundry junior mortgagees, judgment creditors, mechanics lienors and others, any number of whom may have died, moved, divorced, gone out of business or are just in hiding. Then there is the desperation of borrowers who sometimes will do or say almost anything to stave off loss of their property – a tactic they too readily save for the end of the case.
Just how perilous this aspect of the foreclosure methodology is emerges from this case. [Long Island Sav. Bank v. Meliso, 229 A.D.2d 478, 645 N.Y.S.2d 519 (2d Dept. 1996)]. In a foreclosure action, a defendant opposed the judgment of foreclosure and sale on the ground of lack of service. An appellate court required a hearing, noting the general rule that a sworn denial of service by a defendant is alone sufficient to rebut the process server’s affidavit, forcing the plaintiff to establish personal jurisdiction by a preponderance of evidence at what is called a traverse hearing. That the defendant even had actual notice of the foreclosure action is not a substitute for jurisdiction by valid process service.
The ultimate danger is not necessarily that jurisdiction will be found wanting – although that happens often enough with courts sympathetic to borrowers – but that foreclosures are open to significant delay merely because a defendant swears there was no service, even though he knew about the foreclosure all along and did nothing until the proverbial eleventh hour! The most meticulous process servicers can’t avoid this problem. Its just too easy for the borrower to swear it never happened.
Perhaps the only constructive step the mortgage servicer can take is to help counsel locate the borrower. If there are records as to where the borrowers’ letters originated, or where their phone calls came from, perhaps those not quietly reposing at the mortgaged premises can be more assuredly found.
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.