A facially adequate cause of action to foreclose a mortgage only requires allegations regarding the existence of the mortgage, the unpaid note, and the obligor’s default thereunder. IndyMac Venture, LLC v Amus, 164 AD3d 883 (2d Dept. 2018). Thus, a plaintiff in a foreclosure action is not required to prove that it is the true owner of the loan, unless Standing (legal right) is specifically raised as a defense. When Standing is contested, a plaintiff must establish, through admissible evidence, that it was the owner of the underlying Note at the commencement of the action.
On January 23, 2019, the Appellate Division, Second Judicial Department, made abundantly clear in US Bank National Association v. Kenyatta Nelson, et al., that the defense of lack of standing is indisputably waived unless it is timely interposed as an Affirmative Defense or asserted in a pre-Answer Motion to Dismiss. The Court affirmed that a defendant’s mere denial to a bank’s allegation of ownership of the mortgage loan documents does not effectively place Standing at issue. Specifically, the Court found that a
defendant must affirmatively plead lack of standing as an affirmative defense in the answer in order to properly raise the issue in its responsive pleading.
The Court found that to hold otherwise would
render the obligation under CPLR 3018(b) to specifically plead affirmative defenses in the answer meaningless, delay the legislatively favored prompt adjudication of the defenses at an early point in the litigation, and cause prejudice and surprise to plaintiffs.
As mortgage loans are often bought, sold, and securitized, issues may arise over which entity has the legal right to foreclose — resulting in legitimate questions of Standing. Accordingly, it is important to properly raise Standing as an Affirmative Defense in order to compel the bank to also prove its legal right to foreclose.