Bank May Still Be Lawful Holder of a Note and Mortgage, and Therefore Have Standing to Bring a Foreclosure Action, After the Loan Has Been Sold

The Third Department reversed Supreme Court’s grant of summary judgment to defendant in a foreclosure action.  Supreme Court held that the plaintiff, Wells Fargo Bank, did not have standing to bring the foreclosure action because the loan had been sold to Fannie Mae at the time the action was started.  The Third Department explained that if Wells Fargo was the lawful holder of the note and mortgage when the action was brought, even though the beneficial interests in the note had been sold, it would have standing. “Holder status is established where the plaintiff possesses a note that, on its face or by allonge, contains an indorsement in blank or bears a special indorsement payable to the order of the plaintiff … .” Here a question of fact whether plaintiff physically possessed the note at the time the action was commenced precluded summary judgment:

Holder status is established where the plaintiff possesses a note that, on its face or by allonge, contains an indorsement in blank or bears a special indorsement payable to the order of the plaintiff (see UCC 1-201…). Notably, “[t]he holder of an instrument whether or not he [or she] is the owner may transfer or negotiate it[, and] discharge it or enforce payment in his [or her] own name” (UCC 3-301 … ).. Here, the note was originated by plaintiff and a copy submitted on the motion, alleged to be in plaintiff’s possession at the time it commenced this action, is endorsed in blank. Thus, notwithstanding the sale of the beneficial interests of the note to Freddie Mac, plaintiff has the right to enforce the note as its lawful holder so long as it can prove that it physically possessed the note at the time the action was commenced. Wells Fargo Bank, NA v Ostiguy, 2015 NY Slip Op 03015, 3rd Dept 4-9-15