How Can a Defendant Successfully Challenge the Plaintiff’s Standing in a Foreclosure Action?

NY Bankruptcy LawyerWhen a bank files a foreclosure action, you might assume that the institution has a legal interest in the mortgage loan. Otherwise, why would it seek a foreclosure? You would be surprised at the number of lenders and servicers who attempt to file for foreclosure without the legal authority to do so. A homeowner must identify when a plaintiff does not have the authority and to defend against the foreclosure action by challenging the plaintiff’s standing.

Legal Standing in New York Foreclosures

In order to bring any type of legal action, you must have standing. New York courts have held:

A plaintiff has standing in a mortgage foreclosure action where it is the holder or assignee of the underlying note at the time the action is commenced (see Aurora Loan Servs., LLC v Taylor, 25 NY3d 355, 361 [2015]; HSBC Bank USA, N.A. v Spitzer, 131 AD3d 1206 [2015]). “Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient. (emphasis added)

In 2013, New York passed the “produce the note” law, which requires that a lender present the required documents to show standing with the foreclosure petition. The law requires the following:

[T]he complaint shall be accompanied by a certificate, signed by the attorney for the plaintiff, certifying that the attorney has reviewed the facts of the case and that, based on consultation with representatives of the plaintiff identified in the certificate and the attorney’s review of pertinent documents, including the mortgage, security agreement and note or bond underlying the mortgage executed by defendant and all instruments of assignment, if any, and any other instrument of indebtedness including any modification, extension, and consolidation, to the best of such attorney’s knowledge, information and belief there is a reasonable basis for the commencement of such action and that the plaintiff is currently the creditor entitled to enforce rights under such documents. If not attached to the summons and complaint in the action, a copy of the mortgage, security agreement and note or bond underlying the mortgage executed by defendant and all instruments of assignment, if any, and any other instrument of indebtedness including any modification, extension, and consolidation shall be attached to the certificate.

This law requires that lenders attach copies of the required documents to show standing to the complaint, or provide an affidavit from the attorney that the documents were lost but that the plaintiff has standing.

In other words, you may want to find out if the “holder”—the plaintiff—has actual physical possession of the original note and original mortgage at time of commencement of case. Moreover, you may wish to demand proof, such as a detailed affidavit from a person with actual knowledge or actual production of the original documents.

You may also try to discover if the “assignee of note” is a recorded assignment of the mortgage (which we frequently see) or an endorsement of the note to the plaintiff (which is frequently missing).

As recent New York cases show, a bank cannot simply get around the requirement to produce the actual documents by having just anyone sign an affidavit of standing.

Consider the following two case decisions.

Bank of N.Y. v. Willis and Aurora Loan Services, LLC v. Ang

In both of the above cases, New York appellate courts agreed with the homeowners that the banks did not sufficiently establish standing through their affidavits. In Bank of N.Y v. Willis, the bank presented an affidavit from an assistant vice president from Bank of America (the loan servicer) stating a review of the business records showed the bank received the physical note around March 2007. However, the assistant vice president was not personally familiar with the bank’s procedures and policies, so the Court held the affidavit was insufficient to prove the bank received the note and, therefore, the bank did not establish standing.

In Aurora Loan Services, LLC v. Ang, the bank provided an affidavit from an assistant secretary of Nationstar Mortgage claiming a review of business records showed the bank had possession of the note. However, since the assistant secretary did not claim to be personally knowledgeable of the bank’s practices, the Court found in favor of the homeowner’s challenge to standing.

It is important to have an attorney who can review the documents and/or affidavits submitted by a bank with a foreclosure petition and determine whether the documents provided may lead to a successful standing challenge. These cases show that New York courts will not accept anything to prove standing, and homeowners can win a motion to dismiss and gain more time to rectify their mortgage default or obtain a loan modification.

Challenging Standing in the Foreclosure Process

If a homeowner suspects that a plaintiff in a foreclosure does not have standing to sue, they must raise the issue in their answer or pre-answer motion to dismiss. The motion must state the reasoning for the lack of standing and law to support the assertion. These motions can be complicated, so you want an experienced foreclosure defense attorney filing the motion for you.

If you fail to assert this defense in the answer or pre-answer motion, courts in New York have held you miss your opportunity to do so. In Wells Fargo v. Mastropaolo, the court ruled that, “since the defendant did not raise the standing issue in his answer or in a pre-answer motion to dismiss the complaint, Wells Fargo correctly argued that the defendant did, in fact, waive any defense based on a lack of standing, pursuant to CPLR 3211(e).” This is only one of many cases that ruled in this manner. For this reason (among others), it is critical to have the right lawyer representing you from the very beginning of your case to ensure you do not miss the chance to assert defenses such as lack of standing.

Contact a Long Island Foreclosure Defense Law Firm to Discuss Your Options

The above is only a brief look at standing challenges in New York foreclosure cases. The best way to know possible defenses in your case is to discuss your situation with a Nassau County foreclosure defense attorney right away. Call the Law Office of Ronald D. Weiss, P.C., at (631) 271-3737 or contact us online for a free consultation today.