Court Reverses Summary Judgment in Mortgage Foreclosure Case due to Lack of Standing. Learn about the legal implications and importance of establishing standing in foreclosure actions. #MortgageForeclosure #LegalRuling #StandingMatters

HSBC Bank v. Gilbert

The plaintiff failed to demonstrate its prima facie entitlement to judgment as a matter of law, because it did not eliminate triable issues of fact regarding whether it had standing as the lawful holder or assignee of the subject note on the date it commenced the action. Decided on August 27, 2014 SUPREME COURT OF THE STATE OF NEW YORK Appellate Division, Second Judicial Department

DECISION & ORDER

In an action to foreclose a mortgage, the defendants Arlene Gilbert and James Coffey appeal, as limited by their brief, from so much of an order of the Supreme Court, Dutchess County (Brands, J.), dated November 30, 2012, as granted that branch of the plaintiff’s motion which was for summary judgment on the complaint insofar as asserted against them.

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and that branch of the plaintiff’s motion which was for summary judgment on the complaint insofar as asserted against the appellants is denied.

On or about May 14, 2005, the defendant Arlene Gilbert executed a note to borrow the sum of $227,500 from Homebridge Mortgage Bankers Corp. The note was secured by a mortgage executed by Gilbert and the defendant James Coffey (hereinafter together the appellants). The mortgage was subsequently assigned to the plaintiff and, when the appellants defaulted, the plaintiff commenced this action to foreclose the mortgage, alleging, inter alia, that it was the owner and holder of the note and the mortgage. The appellants asserted the plaintiff’s lack of standing as an affirmative defense. The plaintiff moved, inter alia, for summary judgment on the complaint insofar as asserted against the appellants, and the Supreme Court granted that branch of the motion.

In a mortgage foreclosure action, where the plaintiff’s standing to commence the action is placed in issue by the defendant, the plaintiff must prove standing to be entitled to relief (see Bank of N.Y. Mellon v Gales, 116 AD3d 723; U.S. Bank, N.A. v Collymore, 68 AD3d 752). The plaintiff has standing where, at the time the action is commenced, it is the holder or assignee of both the subject mortgage and the underlying note (see Bank of N.Y. Mellon v Gales, 116 AD3d 723; Deutsche Bank Natl. Trust Co. v Haller, 100 AD3d 680; Bank of N.Y. v Silverberg, 86 AD3d 274). Written assignment of the underlying note or physical delivery of the note prior to the commencement of the action is sufficient to transfer the obligation (see Bank of N.Y. Mellon v Gales, 116 AD3d 723; Deutsche Bank Natl. Trust Co. v Haller, 100 AD3d 680; U.S. Bank, N.A. v [*2]Collymore, 68 AD3d 752). Once a promissory note is tendered to and accepted by an assignee, the mortgage passes as an incident to the note (see Bank of N.Y. v Silverberg, 86 AD3d 274; Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d 674). However, the assignment of a mortgage without assignment of the underlying debt is a nullity, and no interest is acquired by it (see Bank of N.Y. Mellon v Gales, 116 AD3d 723; HSBC Bank USA v Hernandez, 92 AD3d 843; Bank of N.Y. v Silverberg, 86 AD3d 274).

Here, the plaintiff failed to demonstrate its prima facie entitlement to judgment as a matter of law, because it did not eliminate triable issues of fact regarding whether it had standing as the lawful holder or assignee of the subject note on the date it commenced the action (see Bank of N.Y. Mellon v Gales, 116 AD3d 723; HSBC Bank USA v Hernandez, 92 AD3d 843; U.S. Bank, N.A. v Collymore, 68 AD3d 752).

Accordingly, the Supreme Court erred in granting that branch of the plaintiff’s motion which was for summary judgment on the complaint insofar as asserted against the appellants.

Mortgage Trusts Struggle with Foreclosures as Ownership of Mortgages Remains Uncertain: How FRAUD STOPPERS COTA Can Help Borrowers Win Quiet Title

In a surprising turn of events, trusts attempting to foreclose on loans are encountering significant obstacles in proving their ownership of the underlying mortgages. This predicament arises from defendants' failure to properly transfer title to the mortgages during the closing of the offerings. As a result, trusts find themselves unable to establish their legal standing to initiate foreclosure proceedings. Moreover, investors who believed they purchased mortgage-backed securities are now discovering that they actually acquired non-mortgage-backed securities. In light of these revelations, borrowers facing foreclosure can find assistance in FRAUD STOPPERS Chain of Title Analysis (COTA) to potentially secure quiet title.

The Ownership Quagmire

One of the primary issues undermining trust's foreclosure actions is the inability to demonstrate clear ownership of the mortgages. When mortgages were bundled and sold to investors, proper documentation of the transfer of ownership was often neglected or mishandled. As a consequence, the chain of title, which traces the ownership history of the mortgage from its inception, becomes fragmented and uncertain.

Without a complete and unbroken chain of title, trusts lack the necessary legal standing to foreclose on the properties. To initiate foreclosure proceedings, they must establish that they are the rightful owners of the mortgage and have the authority to enforce the associated rights and remedies. However, without proper documentation, trusts find it challenging to meet this burden of proof, leaving them in a precarious position.

Investors' Misconception

Adding to the complexity of the situation, investors who purchased what they believed to be mortgage-backed securities are now discovering that the securities they hold are not backed by mortgages as originally assumed. This revelation is causing widespread concern among investors who were led to believe they were investing in assets tied to real estate.

The lack of mortgage backing raises questions about the validity and value of these securities. Investors who relied on the purported security provided by mortgages may find themselves facing substantial losses. The revelation that the securities they hold do not have the expected collateral support highlights the need for a thorough investigation into the chain of title and underlying mortgage documentation.

FRAUD STOPPERS Chain of Title Analysis (COTA) to the Rescue

Amidst the chaos surrounding uncertain mortgage ownership and the resulting foreclosure challenges, borrowers facing potential foreclosure can turn to FRAUD STOPPERS Chain of Title Analysis (COTA) for assistance. COTA is a comprehensive and meticulous examination of the chain of title associated with a mortgage, aimed at identifying any irregularities or defects that may render the mortgage unenforceable.

By conducting a COTA, borrowers can potentially uncover critical flaws in the chain of title, such as improper transfers, missing or forged documents, or violations of securitization guidelines. These findings can provide strong legal grounds for borrowers to challenge the validity of the mortgage and seek relief through quiet title actions. Quiet title actions aim to establish the borrower's clear and unencumbered ownership of the property, thereby eliminating any competing claims or interests.

Through a COTA, borrowers can work with legal professionals specializing in mortgage fraud and foreclosure defense to build a robust case challenging the trust's ownership and right to foreclose. Armed with evidence of defective title transfers, borrowers can contest the trust's legal standing, casting doubt on their ability to proceed with foreclosure actions.

The ongoing struggles faced by trusts attempting to foreclose on loans due to the inability to prove ownership of the underlying mortgages have exposed the vulnerabilities in the mortgage-backed securities market. Investors who thought they had acquired mortgage-backed securities are now grappling with the realization that their investments lack the expected mortgage collateral. Meanwhile, borrowers facing foreclosure find solace in the form of FRAUD STOPPERS Chain of Title Analysis (COTA). Through COTA, borrowers can uncover

potential flaws in the chain of title, empowering them to challenge the trust's ownership and pursue quiet title actions. As the legal landscape evolves and the true extent of the ownership crisis unfolds, it is crucial for both investors and borrowers to seek expert guidance to protect their rights and interests.

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