Standing to Foreclose in New York: Does the Bank Actually Have the Right?

Mortgages get bought, sold, securitized, and transferred many times over the life of a loan, and the paperwork that is supposed to follow them often does not keep up. That creates one of the most important questions in any New York foreclosure: does the company suing you actually have the legal right to foreclose? In legal terms, that is the question of standing — and a plaintiff that cannot prove it can lose the case.

The rule: own or hold the note when you sue

Under New York law, the party bringing a foreclosure must be the owner or holder of the note — the actual promissory note you signed — at the time the action is commenced. The note, not the mortgage, is the key instrument; New York courts have repeatedly said the mortgage follows the note, not the other way around. If the plaintiff did not have the note when it filed, it lacked standing, and the case can be dismissed.

How standing is established

A foreclosing plaintiff generally proves standing in one of two ways:

• Physical delivery of the note — the plaintiff shows it had actual possession of the original note, endorsed to it or in blank, before it filed suit. New York's appellate courts have emphasized that physical delivery of the note is what matters, as in cases such as Aurora Loan Services v. Taylor.
• A valid written assignment — an unbroken chain of assignments transferring the note (and mortgage) to the plaintiff before the filing date.

Where the chain breaks down — a missing endorsement, an assignment dated after the case was filed, an assignment from an entity that no longer existed, or 'robo-signed' paperwork — the plaintiff's standing is open to attack. New York's appellate courts, in decisions like Silverberg, have made clear that holding only the mortgage without the note is not enough. Pulling your own note, mortgage, and assignment chain and comparing them against the bank's is the fastest way to spot these gaps yourself — see our self-help mortgage audit guide for exactly what to gather and check.

Common standing problems to look for

1. An assignment dated after the foreclosure complaint was filed — standing is measured at the moment of filing, so a later assignment generally does not cure the defect.
2. A gap in the chain — the loan jumps from one entity to another with no recorded transfer in between.
3. A missing or improper endorsement on the note itself.
4. An assignment signed by a party with no apparent authority, or by an entity that had already merged out of existence.
5. MERS-related transfers where MERS purported to assign the note (as opposed to the mortgage) — a recurring problem in New York case law.

How to raise a standing challenge

In New York, you normally raise lack of standing as an affirmative defense in your Answer, or by a pre-answer motion to dismiss. Importantly, for a residential home loan, RPAPL § 1302-a (effective December 23, 2019) provides that a standing defense is not waived even if you failed to raise it in your answer or a pre-answer motion — and in some circumstances it can be raised later in the case. You should still assert it as early as possible, but for home loans the defense is statutorily preserved. Once it is in the case, you can use discovery to demand the original note, the complete assignment history, and the documents showing who held the note on the filing date. Forcing the plaintiff to actually produce that proof is often where standing defenses are won.

Standing as a meritorious defense

Lack of standing is also a classic potentially meritorious defense for a motion to vacate a default judgment. If a default was entered against you and the plaintiff's standing is questionable, that defect can support both the 'meritorious defense' prong of CPLR 5015(a)(1) and your underlying defense once you are back in the case.