Financial institutions trying to foreclose on mortgages that were assigned to them by another lender may find themselves paying steeper administrative costs to get their paperwork in order, now that the Appellate Division, Second Department, has ruled in Bank of New York v. Silverberg, 17464/08, that the Mortgage Electronic Registration Systems cannot assign the right to foreclose if it does not hold the promissory note underlying a mortgage.

A unanimous panel, in a decision by Justice John M. Leventhal (See Profile), sided with homeowners Stephen and Fredrica Silverberg against Bank of New York, which was trying to foreclose on their home. The couple’s mortgage had originated with a loan from Countrywide Financial, which had assigned it for record-keeping purposes to MERS while holding on to the underlying promissory note (NYLJ, June 13).

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