If A Mortgagor Is Going To Contest Standing He Or She Should Do It Early; Otherwise The Defense May Be Waived

Three recent opinions have confirmed the long-standing evidentiary rule (which courts routinely ignore) that if a mortgagor wishes to contest standing he or she needs to raise that defense at the pleading stage of the case; otherwise it’s waived. In Mortgage Electronic Registration Sys., Inc. v. Barnes , 1-09-2345, (Ill. App. Ct. Dec. 3, 2010) the mortgagor did not answer the foreclosure complaint and was subsequently defaulted. After the sale was held, but before it was approved, the mortgagor asked to set the foreclosure aside on the grounds that the Plaintiff lacked standing. The court held that the mortgagor forfeited her right to challenge standing because she was properly served with the complaint but failed to answer it, was defaulted, and thereafter participated in the action by successfully petitioning the court for a continuation of the sale but did not attempt to raise the standing issue until after the sale and only in response to mortgagee’s motion to confirm the sale. Similarly, in JPMorgan Chase Bank v. Harp , 2011 ME 5, 2011—A.3d— (Jan. 6, 2011) the mortgagor tried to challenge the bank’s standing on the ground that the bank only owned note, but not mortgage, at the time it commenced litigation to foreclose The bank did not acquire the mortgage until after the suit was filed. In response to the bank’s motion for summary, the mortgagor objected to standing but the court over-ruled the objection because the mortgagor did not raise the objection prior to the time the bank cured the standing defect. Also important was the fact that the late acquisition of the mortgage did not change the cause of action or prejudice the mortgagor. The court noted that the bank would have been vulnerable to a motion challenging its ability to foreclose at the commencement of the case but because the assignment of the mortgage was made prior to its motion for summary judgment the bank had met the criteria for summary judgment in a foreclosure action. Lastly, in In re Glover , 09-00744 (Bankr. D.D.C. Jan. 27, 2011) the Bankruptcy court rebuffed a challenge to the mortgagee’s effort to annul the automatic stay which was premised on the basis that the Bank never proved it had standing in the foreclosure proceeding. The Bankruptcy court was not impressed observing that any defense that the bank was not a party in interest with standing to pursue foreclosure or a ratification of the foreclosure sale should have been raised in the foreclosure. Armed with an order ratifying the sale to it, the bank obviously has standing to seek annulment of the automatic stay with respect to the ratified foreclosure sale.