Editor: David Reiss
Brooklyn Law School

November 29, 2012

New Jersey Bankruptcy Court Finds that “Non-Holder” Cannot Enforce Mortgage Note

By Joseph Kelly

In In re Kemp, 440 B.R. 624 (Bankr. D.N.J. 2010) the debtor/plaintiff brought an adversary proceeding to expunge a proof of claim filed on behalf of Bank of New York by loan servicer Countrywide Home Loans. At all relevant times, the original note appears to have been either in the possession of Countrywide or Countrywide Servicing. Judge Wizmur found that under New Jersey’s UCC, the fact that the owner of the note (Bank of New York) never had possession of the note was fatal to its claim as it did not qualify as a “holder.” The court also found that upon the purported sale of the note and mortgage to Bank of New York, the note was not properly indorsed to the new owner. Thus, the Bank of New York could not enforce the note, and the court disallowed the bank’s claim. The court also held that the originator of the note, although in possession of the note, could not enforce the note on behalf of the bank because the bank did not have authority to enforce the note.

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