Clearly establishing standing or locus standi prior to the commencement of a foreclosure action is vital to the viability of the action. Broadly speaking standing to bring a suit requires Injury, Causation and Redressibility. In the context of a foreclosure action Causation and Redressibility are generally easily established as the borrower’s default directly resulted in the lender’s financial loss (Causation) and a favorable court decision within the foreclosure action would correct or “redress” said injury (Redressibility). The final requirement – Injury – is satisfied by showing that the lender that commences the foreclosure action owned the mortgage and the underlying debt (aka the Promissory Note) prior to commencement. The requirement sounds simple to satisfy and in reality is. Despite the straightforwardness and simplicity, numerous foreclosure practitioners fail to clearly establish standing prior to filing the foreclosure complaint.
How Does Plaintiff Show Ownership of the Mortgage and Note Prior to Commencement?
Every state is slightly different in their requirements. Generally speaking, Plaintiff’s ownership of the Mortgage is shown through an assignment of mortgage dated prior to the commencement of the foreclosure action and recorded prior to Judgment. Plaintiff’s ownership of the Note is established through possession of the original paper with wet signatures. Possession is a bit more difficult to prove definitively. A careful foreclosure practitioner will provide a copy of the original Note and the endorsements/allonges transferring ownership into Plaintiff within the foreclosure complaint.
What if I buy a loan in the middle of a foreclosure action? What should I be concerned about?
Keep in mind that once the sale is completed the seller will no longer be concerned with the viability of the action that they commenced or inherited. Therefore, if standing was not probably proven you may have issues receiving the affidavits necessary to prove to the court that standing was established prior to commencement. At Friedman Vartolo we generally recommend that our clients obtain an Affidavit of Possession from the seller or their predecessor in interest prior to purchase.