In a ruling with procedural significance for the mortgage industry, a New York appeals court has found that United Wholesale Mortgage, LLC (UWM) failed to prove it had standing to bring a foreclosure action, reversing a lower court’s summary judgment in its favor.

The decision, issued on April 10, 2025, by the Appellate Division of the Supreme Court of New York, Third Department, stems from a foreclosure case involving a residential property in the City of Schenectady.

The appellate panel held that UWM did not establish it possessed the promissory note at the time it commenced the foreclosure action in December 2022, a requirement when a note is indorsed in blank.

The case began in February 2020, when Theodore and Debra Smith executed a promissory note to borrow a sum from UWM.

The note was secured by a mortgage on their Schenectady property, executed in favor of Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for UWM.

After defaulting on their payments in November 2020, the Smiths transferred the property title to Prime Property Protection, LLC.

In June 2021, MERS assigned the mortgage to UWM.

Later, UWM filed a foreclosure action in December 2022.

While the Smiths did not appear in the case—resulting in a default judgment and order of reference against them—Prime Property Protection did respond, challenging UWM’s standing to foreclose.

The Supreme Court (Justice Thomas Buchanan) granted UWM’s motion for summary judgment against Prime.

Prime appealed.

On review, the Third Department reversed that portion of the ruling.

Although UWM attached a copy of the note to its complaint—indorsed in blank following a special indorsement to a third party—the court determined that this was not sufficient to prove standing.

The indorsements were undated, and UWM did not provide evidence showing it possessed the note at the time it filed the foreclosure.

An affidavit submitted in July 2023 by a representative of UWM’s loan servicer stated that the servicer, acting as UWM’s agent, then had physical possession of the note indorsed in blank.

However, the affidavit failed to state when that possession began.

This omission proved critical.

The court emphasized that “plaintiff failed to demonstrate that it had standing to commence this mortgage foreclosure action.” Under New York law, possession of a note indorsed in blank must be shown at the time of commencement—not merely at the time of motion practice.

Further, the complaint itself could not be relied upon to fill that evidentiary gap.

It was unverified and included conflicting allegations, leaving it with no probative value.

In reversing the grant of summary judgment against Prime, the appellate court allowed the default judgment against the Smiths to remain in effect.

The matter will now proceed without a foreclosure judgment against Prime Property Protection.

The ruling adds to a growing body of appellate decisions in New York requiring strict compliance with standing requirements in foreclosure cases.

Particularly when the note is indorsed in blank—making it payable to the bearer—plaintiffs must provide concrete proof of possession at the precise moment the action is initiated.

For lenders and servicers, the case underscores the need for detailed, dated evidence in support of foreclosure filings, especially where title transfers and mortgage assignments have occurred.

Case Reference:
United Wholesale Mtge., LLC v. Smith, 2025 NY Slip Op 02117 (Decided April 10, 2025)
Court: Appellate Division, Supreme Court of the State of New York, Third Department
Docket Number: CV-24-0017

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Fisher, J.

Appeal from an order of the Supreme Court (Thomas Buchanan, J.), entered November 21, 2023 in Schenectady County, which, among other things, granted plaintiff’s motion for summary judgment against defendant Prime Property Protection, LLC.

In February 2020, defendants Theodore Smith and Debra Smith (hereinafter collectively referred to as the Smiths) executed a note to borrow a certain sum from plaintiff.

Such note was secured by a mortgage on real property located in the City of Schenectady, executed by the Smiths in favor of Mortgage Electronic Registration Systems, Inc. (hereinafter MERS), as nominee for plaintiff.

The Smiths defaulted on payments in November 2020 and subsequently transferred title to defendant Prime Property Protection, LLC (hereinafter Prime). MERS then assigned the mortgage to plaintiff in June 2021, and plaintiff commenced this mortgage foreclosure action in December 2022.

Only Prime answered the complaint, primarily challenging plaintiff’s standing to commence this action. Thereafter, Supreme Court granted plaintiff’s motion for summary judgment.

[FN1] Prime appeals.

When a defendant raises a standing defense in a mortgage foreclosure action, the plaintiff is required to show, as a matter of law, that it has standing in order to be entitled to foreclose

(see JP Morgan Chase Bank, N.A. v Caliguri, 36 NY3d 953, 954 [2020], cert denied 595 US ___, 142 S Ct 110 [2021];

Wilmington Sav. Fund Socy., FSB v LaFrate, 215 AD3d 1023, 1024 [3d Dept 2023]).

A plaintiff may establish standing where it is “the holder or assignee of both the mortgage and the note at the time that the action was commenced”

(U.S. Bank Natl. Assoc. v Ioannides, 192 AD3d 1405, 1407 [3d Dept 2021]).

Although “[h]older status is established where the plaintiff possesses a note that, on its face or by allonge, contains an indorsement in blank or bears a special indorsement payable to the order of the plaintiff”

(Wells Fargo Bank, NA v Ostiguy, 127 AD3d 1375, 1376 [3d Dept 2015]),

“merely attaching the note with a blank indorsement to the complaint is not sufficient for [a] plaintiff to meet its prima facie burden on the issue of standing or to prove [the] plaintiff’s possessory interest in the note”

(U.S. Bank Trust, N.A. v Moomey-Stevens, 168 AD3d 1169, 1172 [3d Dept 2019];

see Towd Point Mtge. Trust 2015-5, U.S. Natl.

Bank as Indenture Trustee v Poulin, 225 AD3d 962, 963 [3d Dept 2024];

Bank of N.Y. Mellon v Rutkowski, 148 AD3d 1341, 1342 [3d Dept 2017]).

Here, plaintiff contends that it established entitlement to summary judgment by virtue of attaching a copy of the note, indorsed in blank, to the complaint and alleging that it held the note and mortgage prior to commencement of the action.

We disagree.

Although the note was originated by plaintiff, it is clear from the indorsements that plaintiff lost possession of the note because there was a special indorsement from plaintiff to a third party, and then a second indorsement from that third party in blank;

neither [*2]of these indorsements was dated.

In support of its motion, plaintiff produced an affidavit from a representative of the loan servicer/attorney-in-fact based on his review of the servicer’s records maintained in the ordinary course of business.

In his July 2023 affidavit, the representative confirmed that the mortgage had been assigned to plaintiff prior to commencement of the action in December 2022.

However, tellingly, the representative only averred that the servicer, as agent for plaintiff, presently maintained physical possession of the original note, indorsed in blank; the representative did not state when either plaintiff or the servicer obtained possession of the note.

Despite being the originator of the note, the record fails to demonstrate whether plaintiff reacquired the note prior to commencement of this action in order to satisfy its moving burden.

Plaintiff’s reliance on JP Morgan Chase Bank, N.A. v Venture (148 AD3d 1269, 1270-1271 [3d Dept 2017]) is misplaced.

Although the type of indorsement was not identified in the decision that was handed down, we take judicial notice of the record filed in that matter and confirm that the note annexed to the complaint in Venture contained a special indorsement payable to only plaintiff

(see record on appeal, vol 1 at 86, in JP Morgan Chase Bank, N.A. v Venture, 148 AD3d 1269 [3d Dept 2017], appeal No. 523018).

This is materially different than here, where the note was indorsed in blank, meaning it was payable to any bearer of the instrument

(see UCC 1-201 [b] [21] [B]),

therefore requiring plaintiff to perform the additional step of proving possession at the time of commencement

(see Towd Point Mtge. Trust 2015-5, U.S. Natl. Bank as Indenture Trustee v Poulin, 225 AD3d at 963; Bank of N.Y. Mellon v Rutkowski, 148 AD3d at 1342).

Neither the moving attorney affirmation nor the affidavit of merit for the loan servicer/attorney-in-fact are sufficient to do so.

We further reject plaintiff’s contention that the complaint was sufficient to establish possession of the note at commencement, as the complaint contained conflicting allegations and was unverified, and therefore it lacked the evidentiary value to support such claim

(see Matter of Jaime v City of New York, 41 NY3d 531, 542 [2024];

Kaloyeros v Fort Schuyler Mgt. Corp., 157 AD3d 1152, 1154 [3d Dept 2018]).[FN2]

Accordingly, plaintiff failed to demonstrate that it had standing to commence this mortgage foreclosure action, and Supreme Court should have denied plaintiff’s motion for summary judgment

(see JP Morgan Chase Bank, N.A. v Caliguri, 36 NY3d at 954;

U.S. Bank Trust, N.A. v Moomey-Stevens, 168 AD3d at 1172-1173;

Wells Fargo Bank, NA v Ostiguy, 127 AD3d at 1377).

We have examined the remaining contentions of the parties and have found them to be without merit or rendered academic.

Garry, P.J., Lynch, Reynolds Fitzgerald and McShan, JJ., concur.

ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as granted [*3]the portion of plaintiff’s motion against defendant Prime Property Protection, LLC for summary judgment; motion denied to that extent; and, as so modified, affirmed.