Lenders and servicers are frequently – and understandably – dismayed that defaulting borrowers will raise outrageous defenses in foreclosures and then so vigorously and vociferously oppose the lender’s motion for summary judgment needed to dispose of the borrower’s answer to allow the case to proceed. That such is par for the course is hardly revealing, but a recent case does offer two principles worthy of note – relating to standing and a plaintiff’s burden upon that motion for summary judgment. [Homar v. American Home Mtg. Acceptance, Inc., 119 A.D.3d 900, 989 N.Y.S.2d 856 (2d Dept. 2014).]
This is a subject we address frequently, for the very reason that it is a defense seized upon with such regularity by defaulting mortgagors. It is always easy to claim that somehow the foreclosing party has no standing, that is, it does not validly hold the note and the mortgage. Unfortunately, lenders and servicers sometimes do stumble in transferring these documents, although most often the defense is truly wanting. Nevertheless, because it is facile to interpose, defaulting borrowers make constant use of it to slow-up foreclosure actions.
Would a borrower attempt to say that lack of standing means that the mortgage itself is no good? Of course they would – and a borrower made just such an argument in the recent case mentioned. That leads to the important principle confirmed by the court which is that even if the bank or servicer lacked standing to begin an action to foreclose, the validity of the mortgage itself is not thereby vitiated.
The lesson of this holding is that should a lender or servicer err in assuring that it has standing, the mortgage remains valid, though attention must now be directed to assuring that the party wishing to foreclose has corrected the standing defect – inconvenient, but not fatal.
BURDEN UPON MOTION FOR SUMMARY JUDGMENT
This is yet another example of a subject that appears to be solely for lender’s and servicer’s counsel. But the lender participates here, too, in making sure that its file is complete and supplying the needed information to counsel.
The underlying principle – again highlighted by the recent case – is that a foreclosing party must present what is called a “prima facie” case. In lay terms, it has to prove the basics: the existence of the mortgage, that the plaintiff holds the mortgage, and that there was a default. (There is a bit more to it than that but such is the essence.) Once that is offered, then the burden shifts to a defendant to offer genuine evidence to defeat the plaintiff’s claim.
But the vital concept addressed in the subject case is the overarching need for the foreclosing plaintiff to actually establish as a matter of law that prima facie entitlement to judgment. If the plaintiff fails to do that, then it is unnecessary for the court to even consider the sufficiency of the defendant’s opposing papers.
Thus, while a lender or servicer may consider a defendant’s answer and its defenses upon a motion for summary judgment to be ridiculous and empty, laden with lies and misconceptions, it won’t matter unless the plaintiff itself presents that prima facie case. In sum, lenders and servicers must be in a position to work with counsel to supply the necessary clear, basic information so that the prima facie case can be made upon summary judgment, whereby the defendant’s defenses really will have to be demonstrated or that defendant will lose.
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.