A recent decision by the Supreme Court of the State of New York, New York County, has ruled that a purchaser of a mortgage, which is already in default, cannot foreclose on that mortgage without personal knowledge of the default.
In this decision, Judge Paul Wooten ruled that the Plaintiff, who acquired the mortgage after the default of the borrower, did not have personal knowledge of the default and could therefore not provide testimony or evidence to the Court regarding the circumstances surrounding the default. The Court did rule however that an affidavit from the original mortgagee, JP Morgan Chase, setting forth the circumstances surrounding the default would allow the foreclosure to proceed.
According to Peter Moulinos, this decision is significant as purchasers of defaulted mortgage notes often do not obtain a covenant for the future cooperation of a mortgagee upon the sale of a mortgage. Without the cooperation of an original mortgagee, a purchaser of a mortgage will not be able to close. Original mortgagees are often hesitant to provide their cooperation after the sale of the mortgage as their main goal is to sell the mortgage and disengage themselves from any further liability or ties to the mortgage.
Please contact Peter Moulinos at firstname.lastname@example.org with any questions regarding this decision.