Securitization of commercial and residential mortgages to finance investments unrelated to the underlying mortgaged properties has spawned a number of unintended consequences. The most recent such consequence results in a challenge to the proofs required for standing to foreclose based upon the plaintiff’s failure to possess a negotiable note when the foreclosure is commenced.
Indeed, because it is axiomatic that a party seeking to foreclose a mortgage must own or control the underlying debt, and may not sue based on control of the mortgage alone (Gotlib v. Gotlib, 399 N.J. Super. 295, 312-13 (App. Div. 2008); see also Wells Fargo Bank v. Ford, 418 N.J. Super. 592, 597 (App. Div. 2011)), the mortgage fundamentally follows the debt, not vice versa. See e.g., Stevenson v. Black, 1 N.J.Eq. 338, 343 (Ch. 1831). This logically leads to the conclusion that a lender, or its assignee, cannot establish standing to foreclose if it possesses only the mortgage, and not the underlying debt.
