January 9, 2013
New York Supreme Court Holds that Assignee Banks Must Produce Evidence of MERS’s Authority to Assign in Order to Have Standing to Foreclose
The New York Supreme Court of Kings County in Bank of New York v. Alderazi, 28 Misc. 3d 376 (Sup. Ct. 2010) held that a foreclosing bank, as assignee, does not have standing to bring a foreclosure action if it cannot submit proof of MERS’s authority to assign the mortgage. In this case, “MERS was referred to in the mortgage as nominee of the mortgagee . . . for the purpose of recording the mortgage.” The court then stated that “MERS, as nominee, is an agent of the principal, for limited purposes, and has only those powers which are conferred to it and authorized by its principal.” Based on this rule, the court held that an assignee moving to foreclose must submit evidence to the court that such authority was granted to MERS by the original mortgagee. Here, “[the assignee] submits no evidence that [the mortgagee] authorized MERS to make the assignment. MERS submits only its own statement that it is the nominee for [the mortgagee], and that it has authority to effect an assignment on [the mortgagee’s] behalf.” Thus, the court found that the assignee in this case could not lawfully conduct a foreclosure proceeding.
The court went on to explain that “even accepting MERS'[s] position that the [mortgagee] acknowledges MERS'[s] authority to exercise any or all of the [mortgagee’s] rights under the mortgage, the mortgage does not convey the specific right to assign the mortgage. The only specific right enumerated in the mortgage is the right to foreclose and sell the property. The general language ‘to take any action required of the Lender including, but not limited to, releasing and canceling this Security Instrument’ is not sufficient to give [MERS] authority to alienate or assign a mortgage without getting the mortgagee’s explicit authority for the particular assignment.” Hence, under the terms of its own agreement, MERS would have had to solicit an explicit grant of the authority to assign the mortgage from the original mortgagee in order to effectuate a valid assignment. Since the assignee could not prove that such a grant of authority occurred in this case, the court found that the assignment was still invalid under MERS’s and the assignee’s argument.
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