January 10, 2013
New York Supreme Court Holds that Assignee Bank Lacks Standing to Foreclose for Failure to Validate MERS’s Authority to Assign and Condemns Frivolous Conduct Relating to “Robosigning”
In HSBC Bank v Taher, 32 Misc. 3d 1208(A) (Sup. Ct. 2011), the New York Supreme Court of Kings County held that an assignee bank conducting a foreclosure action must submit proof of the assignor’s authority to assign the mortgage, including the underlying note, on behalf of the original mortgagee in order for the assignee to lawfully conduct a foreclosure.
In this case, the court found that the assignee bank, HSBC, did not have standing to foreclose on Taher, the homeowner. The court stated, “the instant action must be dismissed because plaintiff HSBC lacks standing to bring this action. MERS lacked the authority to assign the subject Taher mortgage to HSBC and there is no evidence that MERS physically possessed the Taher notes.”
The court went on to explain that MERS must have authority to assign both the mortgage and the underlying note in order for an assignee to lawfully conduct a foreclosure. The court stated, “even if MERS had authority to transfer the mortgage to HSBC… MERS [was not] the note holder. . . . MERS cannot transfer something it never proved it possessed. . . . [Thus,] MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the . . . assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to [HSBC]. Consequently, [HSBC] failed to show that it had standing to foreclose.”
In addition to finding that the assignee bank lacked standing, the court also took the opportunity in this case to highlight its intention to prevent the degradation of the foreclosure process, particularly concerning the practice of “robosigning.” Citing the need to “protect the integrity of the foreclosure process and prevent wrongful foreclosures,” the court announced its institution of a new filing requirement in any foreclosure action. This requirement is that assignees must “file an affirmation certifying that counsel has taken reasonable steps—including inquiry to banks and lenders and careful review of the papers filed in the case—to verify the accuracy of documents filed in support of residential foreclosures.” The court scrutinized HSBC’s foreclosure filing practices, which included instances where the court believed robosigning occurred, and reprimanded the bank and its counsel for its conduct. The court concluded that the conduct bordered on frivolous, and determined that further inquiry, by way of a hearing, was necessary.
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