Four documentation gaps, four failures - and the court treated each one separately
A lender struck out on four separate grounds trying to foreclose on a lost home equity line of credit in New York.
The Appellate Division, Second Department, on September 16 affirmed a lower court's denial of Wilmington Savings Fund Society's summary judgment motion against two Rockland County borrowers. The lender could not prove it owned the HELOC agreement it was trying to enforce.
The borrowers originally took out a home equity line of credit with Bank of America, which later assigned the mortgage to Wilmington Savings Fund Society. The lender filed to foreclose in November 2022. The borrowers challenged its standing - its legal right to bring the case - and the court agreed on every count.
Start with the assignment. Bank of America's mortgage transfer was executed by Pretium Mortgage Credit Partners I Loan Acquisition, LP, acting as attorney-in-fact. Wilmington Savings Fund Society produced no evidence Pretium had authority to sign on Bank of America's behalf. Without that proof, the assignment was unverified.
Then the allonge - a slip attached to a negotiable instrument to carry endorsements. The lender submitted one with an undated endorsement from Bank of America, but the court found no proof it was "so firmly affixed" to the HELOC agreement as to become part of it.
Physical possession did not help either. An affidavit from a Bank of America assistant vice president failed to establish the lender ever held the original agreement.
That left the lost-note path. Wilmington Savings Fund Society admitted the original was gone. Under New York's UCC 3-804, a party can enforce a lost instrument if it proves ownership and explains the loss. The affiant never stated when the search occurred, who conducted it, or how the agreement went missing. Four arguments, four failures.
The lower court had gone further still, dismissing the complaint on its own initiative. The appellate panel reversed that move, holding sua sponte dismissal - where a court acts without either party asking - "is to be used sparingly and only when extraordinary circumstances exist." Nothing extraordinary existed here, so the case stays alive. The lender gets another shot if it can fix the paperwork.
For default teams and foreclosure counsel, the decision is a documentation stress test. The Second Department evaluated each gap on its own. Patching one would not have rescued the rest.
