Lenders, trusts on notice as court blocks second‑lien sale after forged filings
New York’s appellate court cleared forged satisfactions and blocked a stand‑alone second‑lien sale in a Brooklyn foreclosure on December 3, 2025.
This dispute traces back to a first mortgage from 2008. In November 2008, borrower Abul Hasan signed a $525,000 note secured by a first mortgage in favor of HSBC’s predecessor. In December 2009, three satisfactions of that first mortgage were recorded, and a foreclosure on the first mortgage was filed the same month. Ownership later changed. In January 2010, Waqas Ahmed signed a $417,000 note to Home Loan Center, Inc., secured by a second mortgage. In October 2013, JPMorgan Chase Bank, N.A., as assignee of the second mortgage, began a foreclosure on that lien and obtained a judgment of foreclosure and sale in June 2015. The first‑ and second‑mortgage actions were later consolidated.
USROF III Legal Title Trust 2015‑1, then holding the second mortgage, intervened in the first‑mortgage case. HSBC filed an amended complaint asserting that the three satisfactions tied to the first mortgage were fraudulent and moved to expunge them. In an order dated November 3, 2021, the trial court, among other things, in effect granted expungement as to USROF and removed
USROF from the caption. On reargument in an amended order dated February 2, 2022, the trial court changed course and excluded USROF from the expungement. Separately, in 2022, Palm Avenue Hialeah Trust, then holding the second mortgage, moved to ratify the June 4, 2015 judgment of foreclosure and sale, extend the time to conduct a foreclosure sale, and appoint a referee. 737 Hancock St. Corp., a successor in interest to the original owner, opposed and cross‑moved pursuant to CPLR 3215(c) to dismiss the amended complaint insofar as asserted against nonappearing defendants as abandoned. In two orders dated October 12, 2022, the trial court granted Palm’s requests and denied 737 Hancock’s cross‑motion.
On appeal in HSBC Bank USA, N.A. v Hasan (Appellate Division docket 2022‑01578), the Appellate Division, Second Department, modified the February 2, 2022 amended order and, upon reargument, adhered to the November 3, 2021 determination that, in effect, granted HSBC’s motion to expunge the three satisfactions of mortgage as against USROF, with costs to HSBC. The court explained that a discharge or satisfaction of a mortgage executed and recorded by one who has no interest in the mortgage is void at its inception. As a result, the forged satisfactions here had no legal effect. The court also held that notices of pendency filed in the 2009 action provided USROF and its predecessors with constructive notice, and, together with their knowledge of the existence of three satisfactions, were sufficient to require inquiry. Because that inquiry did not occur, neither USROF nor its predecessors were bona fide encumbrancers for value, and USROF should not be excluded from the expungement.
In the companion appeal (Appellate Division dockets 2022‑09584 and 2022‑09585), the court addressed Palm’s effort to move forward on the 2015 second‑mortgage judgment after consolidation, and 737 Hancock’s CPLR 3215(c) cross‑motion. The court modified the first October 12, 2022 order by deleting the provisions granting Palm’s requests to ratify the 2015 judgment and extend time to conduct a foreclosure sale, and substituted provisions denying those branches of the motion.
It vacated overlapping portions of the second October 12, 2022 order that had ratified the judgment, extended time, and appointed a referee, and dismissed the appeal from the second order as academic in light of those modifications. The court concluded Palm did not establish entitlement to ratify and proceed on the stand‑alone 2015 judgment after consolidation because lien priority would need to be addressed in judgments disposing of the consolidated action. As to 737 Hancock’s cross‑motion, the court held that 737 Hancock had standing to move, but the trial court properly denied the motion: a conditional order extended the plaintiff’s time to move for default, the plaintiff moved within that extended period, and the circumstances showed sufficient cause not to dismiss for abandonment.
Here’s what you need to know: if satisfactions in the record were filed by someone with no interest in the mortgage, they can be expunged to clear title – even against a junior assignee that had reason to look closer. And once first‑ and second‑lien foreclosures are consolidated, a junior holder cannot revive an earlier, separate judgment to force a sale before priority is resolved in the combined case.
