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Court of Appeals Hold That Lender Is Not Required to Have Physical Possession of Note Before Foreclosing

For many years, it has been a precept of New York foreclosure law that to have standing to foreclose, the lender must have physical possession of the note underlying the mortgage debt and be able to produce the original note in order to obtain a judgment of foreclosure. In two cases decided this month, New York’s highest court, the Court of Appeals, has relaxed that requirement. The Court explained that a lender must demonstrate that it has standing to foreclose through appropriate evidence, but stressed that “[t]here is no ‘checklist’ of required proof to establish standing.” For example, in one case, the lender established standing by submitting a copy of the endorsed note and “an affidavit of possession based on an employee’s review of [the lender’s] business records.”

The Court specifically stated that “there is no per se rule requiring the court to grant a request for inspection of the original note prior to granting summary judgment in a mortgage foreclosure action.” The Court directed that to the extent prior lower-court decisions “have held or suggested otherwise, they should not be followed.” This new holding may be particularly significant in cases where a mortgage becomes part of a securitization pool and may change hands from one financial institution to another several times during the lifetime of the loan, and may become lost. The cases are JPMorgan Chase Bank, N.A. v. Caliguri, 2020 N.Y. LEXIS 2870, N.Y. Slip Op. 07660, and US Bank National Association v. Nelson, 2020 N.Y. LEXIS 2869, 2020 N.Y. Slip Op. 07661, both decided December 17, 2020.