The Court of Appeals recently confirmed that “the note, and not the mortgage, is the dispositive instrument that conveys standing to foreclose under New York law,” and that “the validity of the … assignment of the mortgage” is “irrelevant!”

The case, Aurora Loan Services, LLC v. Taylor, just decided by the Court of Appeals on June 11th 2015, confirms that it is critical for lenders to have possession of the note before commencing a foreclosure, affirming the decision of the Appellate Division 2nd Dept case, Bank of N.Y. v. Silverberg, decided in 2011.

In the Silverberg case, the plaintiff transferred only the mortgage, and the Appellate Division held that the assignment of mortgage was a nullity and that all that mattered was whether the note itself was validly transferred. In this most recent case, however, it was the note that was validly transferred but not the mortgage. The defendant argued that because the mortgage was not transferred, the plaintiff lacked the standing to foreclose. As with the Silverberg case before, the Court rejected this line of argument, holding that the transfer of the note is all that really matters.

Given the Silverberg and Aurora decisions, the question becomes: Why is it still necessary to have assignments of mortgage? The answer is that some courts in New York still require them and will not allow you to foreclose unless all assignments have been obtained and there is no break in the chain of title. In fact, both Kings County and Schenectady County will not allow foreclosure unless all assignments of mortgages have been obtained and recorded!

Accordingly, until the lower courts adapt and cease to require assignments of mortgages, it will remain necessary to obtain them. Should it be impossible to do so in certain specific instances, however, these recently decided cases should enable a lender to obtain an “exception” based upon their possession of the note, and be allowed to foreclose.