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Consolidation and Assignment of Mortgages Does Not Affect Validity of Original Mortgages

The Second Department explained that the consolidation and assignment of mortgages did not affect the validity of the original mortgages:

In the instant matter, the plaintiff increased the outstanding balance of the first mortgage by borrowing the second mortgage loan and executing the CEMA [Consolidation, Extension and Modification Agreement].  Although the CEMA  created a single mortgage lien, “[a] consolidation of outstanding loans is a device intended for the convenience of only the contracting parties” and “cannot impair liens in favor of parties that are not the contracting parties, which retain their independent force and effect” … . Where, as here, balances of first mortgage loans are increased with second mortgage loans and CEMAs are executed to consolidate the mortgages into single liens, the first notes and mortgages still exist and may be assigned to other lenders … . Further, an assignment of a loan obligation means that the obligation has been transferred, not paid in full and, thus, contrary to the plaintiff’s allegation, does not render the obligation satisfied and discharged.  Benson v Deutsche Bank Natl Trust Inc, 2013 NY Slip Op 05606, 2nd Dept 8-14-13

 

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