The title of this alert may sound like a pedantic subject – something solely for the lawyers. While it certainly is for attorneys, the principle is a meaningful one, something servicers benefit from knowing – elicited as is our approach from a recent foreclosure decision on the subject [Deutsche Bank Nat’l. Trust Company v. Hussain, 78 A.D.3d 989, 912 N.Y.S.2d 595 (2d Dept., 2010). Another just as recent case made the same point: Countrywide Home Loans Servicing, L.P. v. Albert, 78 A.D.3d 983, 912 N.Y.S.2d 96 (2d Dept. 2010).]
Standing has recently – and for some time – been a hot button issue in the mortgage foreclosure arena. Sometimes, of course, it is not a matter of concern, as when bank x originates a mortgage and continues to hold the paper (even if it might engage some other servicer). But when the mortgage is assigned, particularly multiple times, there is always the possibility of a break in that chain of assignments. Or, upon the last assignment, the actual assignment document has not been delivered.
It should be recognized that as a matter of law in New York, delivery of the mortgage documents with the intention that there is to be an assignment suffices – that is to say, there is then no absolute need for a written assignment of mortgage. At the same time, there are many reasons why having a written assignment is meaningful, and so, overwhelmingly, the goal is to have that paper.
The issues concerning the validity and timing of mortgage assignments, and their relationship to the assignment of the debt are both extensive and nuanced. That point, combined with the greatly elevated vigilance of courts and borrowers’ attorneys about the subject bring it under regular scrutiny.
But the issue for our attention here is the consequence of a borrower neglecting to raise such a defense of standing (i.e., whether the foreclosing plaintiff is the true holder of the note and mortgage). The new case mentioned confirms what the law has always been in this regard: a defense of standing is indeed waivable.
The context of the recent case is one which comports with the way the issue would typically arise. There, a borrower had defaulted. Neither an answer had been submitted nor had a pre-answer motion asserting the defense of lack of standing been made. It was only upon a motion to vacate the judgment of foreclosure and sale that the borrower attempted to argue that the foreclosing plaintiff did not have standing. But it was too late. The defense can be waived and was waived here. That the borrower defaulted is that waiver.
In the foreclosure realm, an ever more strict approach in response to foreclosures appears to be the norm. As our readers are aware from an earlier alert, a defense that the 90-day notice was not sent cannot be waived. While we would quarrel with that decision, it is an appeals court level and is unlikely to be appealed higher and therefore will remain the law. But standing is different, and the noted new case tells us that anew.
All this observed, readers should recall our recent alert highlighting the multitudinous dangers of a proposed new statute which would convert standing to a non-waivable defense. While lenders and servicers should not find that concept appealing (we opine that wily borrowers will stockpile the defense to employ on the eve of sale) it is hardly a disaster and it is hardly a bizarre notion. The way the legislation intends to implement the concept, however, is extremely troublesome – the focus of that recent alert.
The ultimate point here: standing is clearly a waivable defense. How long that will be so in New York is problematic at best.
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.