Having been so regularly assaulted on this issue, lenders and servicers know that “standing” is perhaps the hot button issue in New York mortgage foreclosures – and likely well beyond. More than a few foreclosures have been dismissed where courts have determined that the foreclosing party did not hold the note and mortgage at the inception of the action, or for other infirmities leading to a finding of lack of standing.
One issue on this point, though, has become well established: under certain circumstances, the mortgage servicer can be the plaintiff in a foreclosure action even though not the holder of the mortgage.
We have written about this in earlier alerts, but consistent case law does not stop borrowers from trying to litigate the concept yet again, as confirmed by a recent case. [CW Capital Asset Management, LLC v. Great Neck Towers, LLC 99 A.D.3d 850, 953 N.Y.S.2d 89 (2d Dept. 2012)].
Here, borrower executed and delivered a note and mortgage to CIBC, Inc.. Various assignments and a pooling and servicing agreement (PSA) led the mortgage to Registered Holders J.P.Morgan Chase Commercial Mortgage Pass-Through Certificates, Series 2006 – CIBC 17 (the Trust), and Bank of America, N.A. (Bank of America) became the trustee for the Trust. The eventual plaintiff in the foreclosure (when the borrower defaulted) was CW Capital Asset Management, LLC (CW Capital) as the special servicer of the loan.
Of course the borrower moved to dismiss the foreclosure on the ground that CW Capital as special servicer for Bank of America, as Trustee for the Trust lacked standing.
The court denied the borrower’s motion because the required standards for a servicer to be a plaintiff were met. These were: (1) The complaint identified the Trust as the owner of the note and mortgage; (2) the action was maintained by CW Capital in its capacity as servicing agent and (3) in the PSA, Bank of America’s predecessor, the Trustee for the Trust, had delegated to CW Capital the authority to act regarding the subject mortgage.
So, yes, when the noted requirements are complied with, the servicer can be the plaintiff in a mortgage foreclosure. This does not mean that defendants won’t cause servicers to incur time and money defending their ability to foreclose, but it does mean that the servicer will have been correct.
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.