THE SATISFACTION OF MORTGAGE ON RECORD WHEN DEFENDANT BANK ISSUED A LOAN SECURED BY THE PROPERTY WAS FORGED AND THEREFORE VOID; DEFENDANT BANK, THEREFORE, WAS NOT PROTECTED AS A BONA FIDE ENCUMBRANCER FOR VALUE PURSUANT TO REAL PROPERTY LAW 266 (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined Flagstar Bank was not protected as a bona fide encumbrancer for value under Real Property Law 266. The satisfaction of mortgage that was on record when Flagstar issue a loan secured by the property was forged and therefore void, not voidable:

We disagree with the Supreme Court’s determination that Flagstar’s interest in the subject property was protected by its status as a bona fide encumbrancer for value under Real Property Law § 266, since the satisfaction of mortgage executed and recorded before Flagstar’s issuance of a loan with respect to the subject property was determined to have been forged and was void, not merely voidable. A discharge or satisfaction of a mortgage is void at its inception when it is executed and recorded by one who has no interest in the mortgage … . Accordingly, the forged satisfaction of mortgage in this case was not entitled to any legal effect, and Flagstar’s encumbrance based on it is not protected … . JPMorgan Chase Bank, N.A. v Aspilaire, 2020 NY Slip Op 06510, Second Dept 11-12-20