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Fremont Investment & Loan v. Otto

A-6217-09T1 (N.J. Super. App. Div. 2011) (Unpublished)

MORTGAGES — A foreclosing lender that does not actually possess the promissory note can establish standing as an assignee of the note by presenting an authenticated assignment of the note indicating that the note was assigned before the foreclosure complaint was filed; it need not be the assignee of the mortgage at that time.

In connection with a loan to buy a house, the buyer executed a note to its lender and executed a mortgage to Mortgage Electronic Registration Systems (MERS) as nominee for the lender. The lender then assigned the note to a related company. The borrower stopped making payments and the note holder filed a foreclosure complaint. The borrower challenged the foreclosure, alleging that the lender had “engaged in predatory lending practices, was not a holder in due course of the note and mortgage, and lacked standing to bring [the] action because it did not own or possess the note and mortgage.” The Court rejected all of those allegations and “remanded the matter to the Foreclosure Unit to proceed as an uncontested matter.” About seven months later, the mortgage itself was assigned to the foreclosing lender. Six months after that, a final foreclosure judgment was entered and four months later the property was sold at a Sheriff’s sale. The redemption period expired and the Sheriff’s sale and a Sheriff’s deed passed to a purchaser.

Eight months later, the borrower moved to vacate the final judgment, arguing that the foreclosing lender “was not a holder in due course of the note and mortgage, and lacked standing because it did not own or hold the note and mortgage at the time it filed the complaint.” An officer of the foreclosing lender “submitted a certification certifying the note” had been assigned to it the day of closing, well before the foreclosure action was commenced. A true copy of the assignment was attached to the certification.

Correctly, in the view of the Appellate Division, the lower court ruled “that ownership of the note establishes standing in foreclosure actions.” It also endorsed the lower court’s finding “that although [the foreclosing lender] did not actually possess the note, it was constructively transferred to [the foreclosing lender] prior to the filing of the complaint through the assignment.” Thus, the foreclosing lender had standing to file the complaint. All a foreclosing lender needs to do to establish standing as an assignee is to present “an authenticated assignment of the note indicating that it was assigned the note before it filed [its foreclosure] complaint.”

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