Suffolk County and Nassau County Foreclosure Defense, Legitimacy of Note Indorsement as an Issue

Often a Suffolk County or Nassau County forecloure defense attorney is obligated to defend an action where the mortgage ownership has been allegedly  transferred. Often there has been more than one transfer and the lender asserts that the transfers are valid based on alledged assignments of the mortgage. There are several issues with the legitimacy of the transfer of a mortgage loan, as follows : 1) whether the assignment of the mortgage is valid, 2) whether the indorsement on the note is valid, and 3) whether the lender is in possession of the original loan documents. Here we will concentrate on the second issue, that of whether the note was properly indorsed.

The indorsement of a note typically is on the last page of the note and is typically implemented by a stamp from an authorized officer of the assignor to the assignee bank. Or the indoresement could be in a separate alonge. Issues even with the first endorsement are: when was the endorsement?; did it have an authorized signiture? was the endorsement to the correct assignee? By having a legitimate indorsement on a physically delivered note, the holder of the note may transfer its interest in the note to another. As the Court in EMC Mortgage v. Gass, 37 Misc. 3d 678, 953 NYS2d 455, 2012 2012 NY Slip Op 22252 (August 29, 2012) stated:

“Where, as here, the note is payable to order (ie. the mortgagee, Option One Mortgage Corp.), it may be negotiated by delivery with any necessary indorsement (UCC3-202[1]). By an indorsement, the holder of a note may transfer its interest in the note to another (80 NY Jur 2d Negotiable Instruments and Other ConnnercialPaper §244). An indorsement must be written on the note “or on a paper so firmly affixed thereto as to become a part thereof’ (UCC 3-202[2]). Typically, the indorsement is written on the back of the note (80 NY Jur 2d Negot. Instruments §250). When the indorsement is attached, the attached paper is called an “allonge” (Id). When, [*4]as here, the validity of an indorsement is called into issue, the plaintiff bears the burden of proving the genuineness of the indorsement (Id §253). Actual delivery of an indorsed note is essential to complete the transfer (Id §264).”

Thus according to EMC v Gass, it is the Plaintiff’s burdent to establish that the indoresement is genuine and that the note was physically delivered to the Plaintiff. A simple generic statement in the Plaintiff’s affidavit that it is the holder of the the original loan documents may not be sufficient where the defendant raises sufficient doubt as to the Plaintiff’s standing.“In response to the prior motion, as well as the pending motion, plaintiff had theburden of demonstrating that it has standing to pursue this action (Bank of NY v. Silverberg, supra 86 AD3d at 279; U.S. BankNA. v. Collymore, 68 AD2d 752, 753). As discussed above, plaintiff has failed to establish whether and when the note was actually indorsed, has completely failed to explain the allonge to the note, failed to produce an original “Lost Note Affidavit” that satisfies the standard set forth in VCC §3-804 or even respond to defendant’s contention that the affidavit was signed by a non-employee, and completely failed to address ‘the core requirement of actual delivery of an indorsed note from the original mortgagee, Option One Mortgage Corporation to EMC Mortgage Corporation. There has been no explanation as to the whereabouts of the original, unrecorded first assignment or when the name of EMC Mortgage Corp. was added to thedocument other than Ms. Olson’s speculative statement. And without proof of actual delivery, the attempt to backdate the effective date of the assignment in the second assignment was invalid. In the Consent Order, EMC essentially conceded that mortgages such as defendant’s are entitled to an independent review analyzing the integrity of the pleadings and underlying documents. That consultant review is presently underway. In the meantime, given the above, the Court finds that plaintiff has failed to meet its burden of proof to demonstrate that it has standing to pursue this action. It follows that EMC lacked authority for the purported assignment of the note and mortgage to Kondaur Capital Corporation.”

Often, especially where the mortgage loan is assigned multiple times, the current assignee is lacking any indorsement from the previous assignor. Where there was no indorsement or proof of physical transfer of the original note, a Long Island lawyer representing a Suffolk County or Nassau County foreclosure defendant, can aregue that the Plaintiff has failed to show it has standing and the Court should rule in favor of the defendant homeowner.