Standing to Cancel Erroneous
Sat of Mortgage
Lack of standing is frequently invoked in defense of mortgage foreclosure actions. A New York trial court has now determined that standing must also be proven in an RPAPL Article 15 action to cancel an erroneously recorded mortgage satisfaction. HSBC Bank USA v. Saleemi, 2015 NY Slip Op 50989(U) (Sup. Ct., Queens Cty., June 29, 2015).
The original $1,000,000 mortgage was given to American Home Mortgage Acceptance, Inc. in 2005. The mortgage was modified by an agreement between the borrower and American Home in April, 2007. In May, 2007, MERS (acting as nominee of American Home) “through inadvertence and error,” executed a discharge of the mortgage, which was recorded soon thereafter. MERS (again acting as nominee of American Home) allegedly assigned the mortgage to HSBC in 2012. The assignment was also recorded. The instant action was filed to remove the cloud on title caused by the erroneous discharge.
Many of the evidentiary problems faced by the plaintiff in Saleemi come straight from the foreclosure defense playbook. The affidavit in support of plaintiff came from an employee of the mortgage servicer, not the plaintiff. The servicer failed to show it had authority to act on behalf of the plaintiff. In addition, MERS’ authority to assign the mortgage was not proven. Finally, the copies of the note annexed to the complaint and to the motion papers bore inconsistent indorsements and dates.
The borrower had also deployed another common foreclosure defense gambit: failure to comply with RPAPL §1304. That section requires a written notice be given to the borrower “at least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower, including mortgage foreclosure….” Despite the wide ambit of the statutory language, the court held the section inapplicable to an action to cancel an erroneous discharge.
The “inadvertent sat” has been an ongoing problem in New York, particularly involving lenders or servicers unaccustomed to dealing with mortgage recording taxes. There is nothing in the Saleemi opinion to indicate the mortgage was ever in default. An inability to nullify the recorded satisfaction within the applicable statute of limitations may, however, pose enforcement problems in the future.