Courts across the country are starting to really beat back the lenders on standing grounds….read on good people.  They’re New York Cases, but the judicial groundswell is bubbling.

Mortgage Foreclosure/Standing   – Plaintiff commenced an action on September 4,
2007  to  foreclose a mortgage  that was assigned  to  it on September 17, 2007 by an
instrument  which  recited  that  its  effective  date  was  July  29,  2007.  The  Supreme   6
Court,  Kings  County,  denied  the  Plaintiff’s  motion  for  an  Order  of  Reference,
without prejudice to file a renewed motion within ninety days accompanied by proof
that  the Plaintiff owned  the mortgage and note prior  to  the commencement of  the
foreclosure.  Otherwise,  the  action  would  be  dismissed  for  lack  of  standing.
According  to  the  Court,  “[w]]here  there  is  no  evidence  that  plaintiff,  prior  to
commencing  the  foreclosure action, was  the holder of  the mortgage and note,  took
physical delivery of the mortgage and note, or was conveyed the mortgage and note
by written  assignment,  an  assignment’s  language  purporting  to  give  it  retroactive
effect prior to the date of the commencement of the action is insufficient to establish
the plaintiff’s  requisite  standing”. Washington Mutual Bank  v. Patterson, decided
December 15, 2008, is reported at 21 Misc. 3d 1145 and 2008 WL 5233195.

Mortgage  Foreclosure/Standing  – The  Supreme Court, Kings County,  denied  the
foreclosing Plaintiff’s motion for summary judgment and for an Order of Reference,
holding that the Plaintiff  lacked standing. It held that the purported assignment of
the note and mortgage by MERS, as nominee for First Franklin, to the Plaintiff was
invalid. It recited that  it was executed by an attorney on behalf of MERS pursuant
to a corporate resolution. However, neither a corporate resolution nor a power-of-
attorney  was  recorded.  The  Court  granted  the  Plaintiff  leave  to  renew  upon
providing  the Court within  sixty days with  (i) a valid assignment of  the mortgage,
(ii)  an  affirmation  that  the  assignor  and  the  assignee  consented  to  simultaneous
representation  in  connection with  the  assignment,  and  (iii)  an  affidavit  explaining
why  the  Plaintiff  purchased  a  nonperforming  loan.  In  addition,  “if  a  power  of
attorney is used for an agent to act as MERS’ assignor of the instant mortgage and
loan  to Deutsche Bank,  the  power  of  attorney  presented  to  the Court must  be  an
original  or  a  copy  certified  by  an  attorney,  pursuant  to  CPLR  Section  2105″
(“Certification by attorney”). Deutsche Bank National Trust Company, as Trustee,
v. Campbell, decided December 16, 2008, is reported at 2008 WL 5220543.

Mortgage  Foreclosure/Standing  –  A  mortgage  foreclosure  commenced  by  New
Century Mortgage Corporation (“New Century”) on March 7, 2007 was dismissed
by  the  Supreme  Court,  Kings  County,  for  lack  of  standing.    On May  11,  2007,
MERS, the record holder of the mortgage (which appears to have been intended to
have  held  the mortgage  as  nominee  for  New  Century),  purportedly  assigned  the
mortgage  to New Century by Assignment of Mortgage which  included  the phrase:
“Date of Transfer: March 5, 2007″. According  to  the Court, “[w]here  there  is no
evidence  that plaintiff, prior  to commencing  the  foreclosure action, was  the holder
of  the mortgage and note,  took physical delivery of  the mortgage and note, or was
conveyed  the mortgage and note by written assignment, an assignment’s  language
purporting to give it retroactive effect prior to the date of the commencement of the
action  is  insufficient  to establish  the plaintiff’s requisite  standing”.  In addition, on
April 30, 2007 MERS had assigned the mortgage to a different lender. New Century
Mortgage Corporation v. Durden, decided February 2, 2009, is reported at 22 Misc.
3d 1118 and at 2009 WL 264134.

Mortgage Foreclosure/Standing –The Defendant in a mortgage foreclosure asserted
that the Plaintiff did not have standing to commence the action on October 11, 2007
since the mortgage being foreclosed and the note it secured were assigned to it by an
assignment dated October 15, 2007 which recited that it was effective on October 8,
2007. The note, endorsed in blank, was delivered to the Plaintiff on October 8, 2007.
According  to  the Supreme Court, Suffolk County, “an  indorsement of a mortgage
note  in blank together with  its delivery by the owner or  its agent to a transferee  is
sufficient  to  transfer  ownership  of  said  note  and  of  a  mortgage  given  to  secure
it….Said  assignment  [on October  15,  2007]  accurately  reflected  that  the  plaintiff
acquired ownership of the note and mortgage on October 8, 2007, by  its receipt of
delivery of the note  indorsed  in blank. The mortgage followed as an  incident to the
transfer of  the note. The plaintiff was  thus  the owner of  the note and mortgage at
the  time  of  the  commencement  of  this  action”.  Deutsche  Bank  National  Trust
Company v. Gillio, dated February 26, 2009,  is reported at 22 Misc.3d 1131 and at
2009 WL 595560.

UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA ORLANDO DIVISION

In re:

JORGE CANELLAS, Case No. 6:09-bk-12240-ABB
Chapter 7
Debtor.
_____________________________/

ORDER

This matter came before the Court on the Motion for Relief from Stay (Doc. No.22) (“Motion”) filed by U.S. Bank National Association, as Trustee of the LehmanBrothers Small Balance Commercial Mortgage Pass-Through Certificates, 2006-3(“Movant”), and the Objection thereto (Doc. No. 25) filed by the Chapter 7 Trustee Carla P. Musselman (“Trustee”). Hearings were held on November 23, 2009, December 7, 2009, December 21, 2009, and January 4, 2010 at which the Trustee, her counsel, counsel for Movant, and counsel for the Debtor Jorge Canellas (“Debtor”) appeared.

Trustee’s Objection

The Trustee opposes Movant’s Motion on the grounds Movant lacks standing to obtain stay relief and it failed to perfect its security interest prior to the Petition Date.
Her opposition is grounded on the contention the Assignment is invalid. She has
presented various legal theories in support of her position:

1.Aurora Bank FSB f/k/a Lehman Brothers Bank did not own the Mortgage and Promissory Note on the date of execution of the Assignment and had no authority to assign them to Movant.
2. By the terms of the two securitized trusts for Lehman Brothers designated 2006-3 registered with the U.S. Securities and Exchange Commission, no assignment occurred.
3. The Assignment was executed and recorded post-petition and may constitute a violation of the automatic stay pursuant to 11 U.S.C. Section 362(a)(4).
4. Movant has not established that on the Petition Date it had physical possession of the original Promissory Note properly endorsed in its favor.
5. Lehman Brothers’ ability to enforce the Promissory Note or Mortgage was extinguished in 2006 when it was paid by the Trust for the pool of mortgages which form the Trust’s corpus.
6. Title between the Promissory Note and Mortgage were bifurcated, thereby rendering the Mortgage unenforceable.

The Trustee asserts Movant is an unsecured creditor and she has authority to sell the Property free and clear of encumbrances for the benefit of the estate.

Movant asserts the Note and Mortgage are owned by the Lehman Brothers Small Balance Commercial Mortgage Pass-Through Certificates, 2006-3, a private securitized trust, and Movant, as the asserted owner and holder of the Note and Mortgage, has
authority to enforce the security interest. Movant presented with its post-hearing brief an Allonge to Promissory Note (“Allonge”) purportedly dated August 1, 2006 and executed by Jennifer Henninger as the Special Assets Administrative Assistant of Aurora Bank FSB directing: Pay to the Order of U.S. Bank National Association, as Trustee (the ‘Trustee’) under the Trust Agreement dated as of October 31, 2006, among Structured Asset Securities Corporation, as Depositor, Lehman Brothers Bank, FSB, as Servicer, and the Trustee relating to Lehman Brothers Small Balance Commercial Mortgage Pass-Through Certificates, Series 2006-3, without recourse.

Doc. No. 46 (emphasis added).

The Debtor filed an Affidavit (Doc. No. 47) stating he had no prepetition communications with Movant, was not aware Movant had a security interest in the Property, and, if the Assignment is deemed invalid, desires to purchase the Property from the Trustee.

Analysis

The evidence presented establishes the Property is encumbered by the Mortgage, which secures the Debtor’s performance of the Note. The Mortgage was properly perfected pre-petition through its recordation in the Official Records Book for Orange
County, Florida. The Mortgage and Note have not been bifurcated. The Mortgage has not been satisfied. The Debtor had actual knowledge of the unsatisfied Mortgage and the Trustee, through the recordation of the original Mortgage, had constructive, if not actual,
knowledge of the unsatisfied Mortgage. Kapila v. Atlantic Mortgage and Inv. Corp. (In re Halabi), 184 F.3d 1335, 1339 (11th Cir. 1999).

The purported assignment of the Note and Mortgage to Movant does not affect perfection or constitute a transfer of property of the estate or the Debtor. Id. at 1337.
“[A] subsequent assignment of the mortgagee’s interest – whether recorded or not – does not change the nature of the interest of the mortgagor or someone claiming under him.”
Id. at 1338. Recordation of an assignment post-petition does not constitute a violation of the automatic stay. Id. at 1337; Rogan v. Bank One, N.A. (In re Cook), 457 F.3d 561, 568 (6th Cir. 2006) (affirming the analysis of In re Halabi).

It is uncontroverted the Note has been in default since approximately May 2009 and a balance of approximately $300,662.84 is due and owing. The Debtor, who is a property appraiser, values the Property at $250,000.00 and Movant values the Property at $178,000.00. The Debtor is not making adequate protection payments to Movant. There
is no equity in the Property and it is not necessary to an effective reorganization given this is a Chapter 7 proceeding and the disclosures made by the Debtor regarding the Property in his bankruptcy papers. Grounds exist for relief from the automatic stay
pursuant to 11 U.S.C. Sections 362(d)(1) and (d)(2).

Movant’s Motion, however, is due to be denied because Movant has failed to establish it has standing to seek stay relief. A motion for relief from the automatic stay must be prosecuted in the name of the real party in interest. 11 U.S.C. § 362(d); FED. R. 7
CIV. P. 17(a)(1); FED. R. BANKR. P. 7017. “The real party in interest in relief from stay is whoever is entitled to enforce the obligation sought to be enforced.” In re Jacobson, 402 B.R. 359, 366 (Bankr. W.D. Wash. 2009). Only the holder of the Note and Mortgage, or
its authorized agent, has standing to bring the Motion. Id. at 367.
Movant asserts in its Motion it is the “owner and holder” of the Note and Mortgage, but has presented no evidence substantiating that assertion. The copies of the Note presented do not contain an endorsement evidencing an assignment of the Note.
The Affidavit executed by Movant’s loan servicer makes no mention of the location of the original Note or who has possession of it. Movant proffered no business records or testimony tracing ownership of the Note and establishing Movant is the present holder of
the Note.

The veracity of the Allonge and Assignment is questionable. The dates contained in the Allonge are chronologically impossible. The Allonge is dated August 1, 2006, but references a trust that came into existence on October 31, 2006. The signature of Jennifer Henninger is undated and not notarized. The Allonge was not referenced in or filed with Movant’s Motion in October 2009, but was presented three months later as an attachment to its post-hearing brief.

The Assignment was executed and recorded post-petition approximately two weeks prior to Movant’s filing of the Motion for Relief. It was prepared by Jennifer Henninger, who executed the Allonge, and was recorded by the law firm that is representing Movant in this proceeding. Jack Jacob’s execution of the Assignment was notarized by Jennifer Henninger and witnessed by Louis Zaffino, the affiant of Movant’s Affidavit. It appears the Allonge and the Assignment were created post-petition for the purpose of the relief from stay proceeding. Movant did not establish Jennifer Henninger and Jack Jacob had authority to execute the Allonge and Assignment.

Movant’s submissions are insufficient to establish it is the owner and holder of the Note and Mortgage or is authorized to act for whoever holds these documents. In re Relka, No. 09-20806, 2009 WL 5149262, at *5 (Bankr. D. Wyo. Dec. 22, 2009) (granting stay relief where movant established possession of note through testimony of witness who personally retrieved note from movant’s vault); In re Jacobson, 402 B.R. at 370 (denying movant’s stay relief motion due to movant’s failure to establish it was holder of note); In re Hayes, 393 B.R. 259, 270 (Bankr. D. Mass. 2008) (denying movant’s stay relief motion and sustaining debtor’s claim objection due to movant’s failure to establish it was holder of note). Movant has not established it has standing to bring the Motion and the Motion is due to be denied.

Accordingly, it is

ORDERED, ADJUDGED AND DECREED that the Property located at 830 Hoffner Avenue, Orlando, Florida 32809 and more particularly described as:

Lot 7, SUNDAY BLOCK, according to the plat thereof, recorded in Plat Book O, Page 27, of the Public Records of Orange County, Florida is encumbered by the Mortgage executed by the Debtor on August 1, 2006 and recorded in the Official Records Book for Orange County, Florida on August 15, 2006 as Instrument 20060534342 at Book 08805, Page 4292, which Mortgage constitutes a valid properly perfected lien, and which secures the Promissory Note executed by the Debtor on August 1, 2006 in the principal amount of $274,500.00 and designated as Loan
Number 00207199; and it is further ORDERED, ADJUDGED AND DECREED that the amount of the Mortgage lien encumbering the Property exceeds the Property’s value and there is no equity in the Property; and it is further ORDERED, ADJUDGED AND DECREED that the Movant’s Motion for Relief from Stay (Doc. No. 22) is hereby DENIED due to Movant’s failure to establish it has standing to bring the Motion; and it is further

ORDERED, ADJUDGED AND DECREED that the Trustee, within twenty-one days of the entry of this Order, is hereby directed, pursuant to 11 U.S.C. Section 704(a) and Federal Rule of Civil Procedure 5009, to file with the Court a Report of No Distribution or to designate this case as an asset case.

Dated this 9th day of February, 2010.

/s/ Arthur B. Briskman

ARTHUR B. BRISKMAN
United States Bankruptcy Judge