Editor: David Reiss
Brooklyn Law School

January 8, 2013

The Appellate Division of New York State Supreme Court Holds that Assignee Lenders Must Produce Evidence of MERS’s Authority to Assign Mortgage Notes to Lawfully Conduct a Non-Judicial Foreclosure

By Michael Liptrot

The New York State Supreme Court, Appellate Division, Second Department in Aurora Loan Services v Weisblum, 923 N.Y.S.2d 609 (App. Div. 2011) held that a mortgage lender does not have standing to foreclose if it cannot establish its lawful status as assignee. In this case, MERS assigned both a mortgage and mortgage note to Aurora Services (“the Assignee”), who subsequently moved to foreclose on the subject property. At the time of the assignment, MERS was the holder of the mortgage, but not the note, which was held by the original mortgagee. MERS claimed that the assignment was valid because it was acting on behalf of the original mortgagee when it assigned the note. The court rejected this argument and held that the assignment was not valid because the Assignee failed to prove that MERS received an explicit grant of authority to assign the note from the original mortgagee. The court explained that, in general, MERS can legitimately assign notes. However, if the assignee moves to conduct a foreclosure, it must produce evidence of MERS’s authority to assign, which must be granted from the original lenders. The court further held that the evidence must show that the original mortgagee explicitly granted MERS such authority to assign.

Here, the lender failed to produce any evidence of MERS’s authority to assign the notes. Thus, the court found that MERS could not assign the note and therefore the lender did not have standing to foreclose.

| Permalink