Editor: David Reiss
Brooklyn Law School

January 11, 2013

New York Supreme Court, Appellate Division Holds that Assignee Bank Lacks Standing to Foreclose for Failure to Provide Evidence of Valid Note Assignment

By Michael Liptrot

In Bank of New York v Silverberg, 86 A.D.3d 274 (2d Dept. 2011), the court stated, “[t]he principal issue ripe for determination by this Court . . . is whether MERS, as nominee and mortgagee for purposes of recording, can assign the right to foreclose upon a mortgage to a [bank] in a foreclosure action absent MERS’s right to, or possession of, the actual underlying promissory note.” In making this determination, the court outlined the following rules regarding standing in foreclosure proceedings: “[i]n a mortgage foreclosure action, a [bank] 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. . . . [A]n assignment of a note and mortgage need not be in writing and can be effectuated by physical delivery.”

The court found that in this case, “as ‘nominee,’ MERS’s authority was limited to only those powers which were specifically conferred to it and authorized by the [original mortgagee].  Hence, although . . . MERS [had] the right to assign the mortgages themselves, it did not specifically [have] the right to assign the underlying notes, and the assignment of the notes was thus beyond MERS’s authority.” Based on these findings, the court concluded, “MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the corrected assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to the [bank]. Consequently, the [bank] failed to show that it had standing to foreclose.”

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