By: Nicholas Moccia, Esq.
Due to recent court rulings and decisions in the courts of the State of New York where proper “STANDING” in a foreclosure action has been challenged, several title insurance companies will not insure a title where the title to be insured is coming through a foreclosure action either by deed from the referee or after title has passed to the foreclosing lender or its assignee and where the plaintiff commencing the action to foreclose a mortgage does not or did not have “STANDING”. If the foreclosing lender does not have standing to bring the action it is subject to being dismissed and the foreclosure sale and the referees deed may be void.
The issue of standing occurs when a mortgage which is being foreclosed was assigned to the plaintiff by an assignment of mortgage which was dated and/or acknowledged “AFTER” the commencement of the action even when the assignment states that is in fact effective as of a date which is prior to the action being commenced.
Title insurers are now adding this exception to their title insurance policies to circumvent this problem:
The mortgage being foreclosed was assigned to the Plaintiff by an assignment dated on _______, a date which is subsequent to the date upon which the action was commenced. Policy will except any loss, cost or damages that may be incurred due to a claim that the Plaintiff in the foreclosure action lacked “STANDING” to foreclose.
Prospective homebuyers should recognize that this exception protects the title insurance company, not them.