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Memorandum of Support

Legislative Memo: Help Protect Homeowners and Shorten the Foreclosure Process- Clarify Standing to Sue in Foreclosure Actions


A.629 (Weinstein)/S.697 (Klein)

This bill provides that only the owner and holder of a mortgage and note, or its agent, shall have standing to commence a mortgage foreclosure action.  Lack of standing shall be defense that may be raised at any time.  It requires the plaintiff in a foreclosure action to affirm that it is the holder and owner, or its designed agent, of the subject mortgage and note.  The summons and complaint shall include a copy of the original mortgage and note, and all endorsements, assignments and transfers thereof, and any delegations of authority by the owner and holder of the mortgage and note.

Empire Justice Center strongly supports A.629/S.697, which will resolve the problem of a wrongful party bringing a foreclosure action against a New York homeowner.  In New York, in order for a plaintiff to have standing to sue, the plaintiff must be the owner of the mortgage and the holder of the note.  Despite this requirement, hundreds of cases are filed against homeowners each year by parties who lack standing.  The problem has been exacerbated by the rampant securitization of mortgages and subsequent assignments among Wall Street investors. [1] 

Homeowners know the name of their mortgage servicer, but typically do not know who owns their mortgage. [2]  Thus, when a foreclosure is filed, often in the name of an investment bank as trustee, neither the homeowner nor the court has any independent basis to know whether the plaintiff is the rightful party.  Judges have grappled with this problem differently: some courts are routinely dismissing actions sua sponte for lack of verification, while others have allowed cases to continue even though ownership has never been proven.  The lack of clarity and certainty not only presents an injustice for the homeowner, but it is problematic for courts.  Furthermore, a foreclosure conducted by a wrongful party presents serious concerns for any future owner, as well as for a title company seeking to insure the chain of title.       

The proposed legislation fixes this problem in three key ways.  First, the legislation adds Real Property Actions and Proceedings Law (RPAPL), Section 1302-a, codifying that the plaintiff must be the owner and holder of the subject mortgage and note, or has been delegated authority by the owner and holder to initiate a foreclosure action.  Given the breadth of this problem, this requirement is necessary to put into law though it is nothing new, as it already exists in common law. 

Second, the legislation provides that the plaintiff must affirmatively aver in the complaint that it is the owner and holder, or have delegated authority to sue in foreclosure, and that they are in possession of the mortgage and note.  Proper pleading in a foreclosure complaint already should include an averment on the part of the plaintiff that they are the rightful party so in this respect, the legislation simply states what parties should already be doing.  The legislation seeks to avoid potential litigation regarding ownership of the loan by also requiring that the plaintiff provide to the court verification of ownership including endorsements, assignments and transfers, and if applicable, proof of delegation of authority to file suit.     

Finally, the legislation provides the homeowner the right to challenge standing at any time during the foreclosure proceeding, resolving a dispute as to whether such defense may only be raised in the answer or otherwise waived.  At the time the answer is due (within 20 or 30 days of being served with the complaint) defendants typically lack information or reason to challenge whether the plaintiff is the rightful owner.  Homeowners filing answers pro se without the assistance of legal counsel rarely have the wherewithal to challenge standing to sue in their answer.  Cases have proceeded to sale in which the plaintiff did not own and hold the mortgage and note, because the defendant failed this procedural requirement. 

It is anticipated that this legislation will reduce the length of the foreclosure process in New York, a process which many lenders complain is too long.  By providing proof of ownership in the first stage of the foreclosure, defendant homeowners will not have need to raise standing as a defense or bring a motion to dismiss the complaint, which is often the next step expending more time and energy by the parties and the court.  Furthermore, as courts are increasingly conducting their own queries regarding standing, providing validation of the plaintiff’s ownership interest with the filing will bring efficiency to the process and preserve courts’ resources.

The Empire Justice Center strongly supports this legislation and urges immediate passage of A.629/S.697.

End Notes:
[1] See Morgenson, Gretchen, “If Lenders Say ‘The Dog Ate Your Mortgage,’” The New York Times (October 24, 2009) available at:
[2] Pursuant to the Real Estate Settlement Procedures Act (RESPA), homeowners must be notified when servicing of their mortgage is transferred but there is no similar requirement that homeowners be told when or to whom when their mortgage is sold.

This memo was prepared by:

Kirsten E. Keefe

Empire Justice Center
119 Washington Avenue
Albany, NY  12210 

(518) 462-6831
(518) 935-2852