Service providers of mortgages who do not know the location of the promissory note lack standing to bring foreclosure lawsuits in the State of New York. In any case where the servicing organization is different than the originator of the note, the servicing organization may not have standing to bring a foreclosure action in the State of New York. The reasons for this relate to the fact the homeowner does not know if the note and the mortgage were properly assigned by the originating financial institution.
Chain of Assignment
Let’s say Bank #1 is the originator of the mortgage loan on your house. Sometime after the closing, you are advised to pay your mortgage payments to Bank #2 and on a later date you are notified to pay your mortgage payments to a mortgage servicing organizations #3. In each of those transactions, a proper assignment would have to have taken place with regard to the note and mortgage. If the assignment did not take place and Banks #3 brings a foreclosure action against you for nonpayment of your mortgage, they do not have standing to bring this proceeding. You can interpose a defense to the proceeding that the party bringing the proceeding is an incorrect party and move to have the case dismissed.
Lack of Standing Can Not Be Repaired
If the institution bringing the foreclosure lawsuit against your home did not have standing to sue when the lawsuit was initiated, they cannot correct this error after the lawsuit is started. In the event the financial institution did not have an appropriate assignment of the note at the start of the foreclosure proceeding and later obtains a valid assignment of the note, this does not correct the lack of standing at the time of the initiation of a lawsuit.
Foreclosures and Estates
If a homeowner dies, the financial institution bringing a foreclosure cannot sue the dead homeowner. If no estate exists, the financial institution must take action to create an estate for the deceased mortgage holder before they can bring a foreclosure proceeding.
