Can a Long Island foreclosure attorney defend his client by asserting that the lender lacks the original loan documents? Although this defense has often been overused to the point of being overlooked as a serious defense, lawyer defending the foreclosure of a Long Island homeowner should assert this defense since often the original loan documents are not in the lender’s possession. Especially where there are multiple assignments, with some of the assignments being to securitized trust entities or being implemented through Mortgage Electronics Registration Systems there is a significant likelihood that the original loan documents are no longer in the lender’s possession. A quick examination of the mortgage loan documents (the note, mortgage and assignments) attached to the foreclosure complaint can demonstrate that the documents are reduced, blurred and appear copied from no-originals.
Given the assignment of the mortgage to the Plaintiff can be often be challenged in situations where there is a potential defective MERS assignment, or other blatant problems with the assignement of the mortgage, the Plaintiff often needs to show additional proof that it has standing. Possession of the original documents is a vital element in showing standing but upon information and belief the Plaintiff often lacks possession of the original documents. The Defendant has the ability to demand discovery where it seeks to inspect the loan documents kept by the Plaintiff to ascertain whether the Plaintiff is in possession of the originals.
As quoted from EMC Mortgage v. Gass, 37 Misc. 3d 678, 953 NYS2d 455, 2012 2012 NY Slip Op 22252 (August 29, 2012): “Standing requires an inquiry into whether a litigant has an interest in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant’s request” (Bank of NY v. Silverberg, 86 AD3d 274, 279 [internal quotations and citations omitted.]). A plaintiff in a foreclosure action must be either the holder or assignee of the note and mortgage to have standing to commence the action (HSB C Bank y, Hernandez, 92 AD3d 843; LaSalle Bank National Assoc. v. Ahearn, 59 AD3d 911). An assignment of the mortgage without an assignment or physical delivery of the note is a nullity.
The burden is on the Plaintiff, when challenged to prove standing. In US Bank v. Collymore, 68 A.D.3d 752, 890 NYS 2d 578, 2009 NY Slip Op 09019 (Appel. 2nd Div. December 1, 2009) the Appellate Division denied the plaintiff Summary Judgment and held that genuine issues of fact existed as to whether the bank had standing to bring the foreclosure action. The Court in Collymore stated: “Where, as here, standing is put into issue by the defendant, the plaintiff must prove its standing in order to be entitled to relief” (see Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 242 ; TPZ Corp. v Dabbs, 25 AD3d 787, 789 ; see also Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 769 ). In a mortgage foreclosure action, a plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced (see Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d 674 ; Federal Natl. Mtge. Assn. v Youkelsone, 303 AD2d 546, 546-547 ; 754*754 First Trust Natl. Assn. v Meisels,234 AD2d 414 ). Where a mortgage is represented by a bond or other instrument, an assignment of the mortgage without assignment of the underlying note or bond is a nullity (see Merritt v Bartholick, 36 NY 44, 45 ; Kluge v Fugazy, 145 AD2d 537, 538 ). 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 to transfer the obligation, and the mortgage passes with the debt as an inseparable incident (see Weaver Hardware Co. v Solomovitz,235 NY 321 ; Payne v Wilson, 74 NY 348, 354-355 ; LaSalle Bank Natl. Assn. v Ahearn, 59 AD3d 911, 912 ; Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d at 674; Flyer v Sullivan, 284 App Div 697, 699 ).
Since the alternative to an assignment of the mortgage and note is a physical delivery of the original mortgage and note to the Plaintiff prior to the commencement of the foreclosure action, the possession of the original mortgage loan documents may be sufficient to assert standing. However, often there is no proof that the Plaintiff has possession over the original loan documents.
Often despite a generic assertion in the complaint, the Plaintiff makes no effort to show that it is in actual possession of the original loan documents. Often, given the plaintiffs use of blurred and reduced copies of the loan documents, and attempts to avoid discovery and inspection of the original documents, all evidence shows that the Plaintiff is only in possession of copies of the mortgage loan documents. Given the frequent lack of possession of origianl loan documents, the foreclosing plaintiffs need to show a valid assignment of the mortgage and a valid endorsemnet of the note, something that also is replete with defects.
Therefore a forclosure lawyer representing a Long Island homeowner should always insist on having the lender produce the original loan documents. Even the effectiveness of this defense was initially exaggerated, in combination with other defenses this foreclosure defense can be effective.