Mortgage lenders have many things to worry about when a loan goes into default and they seek to enforce their remedies, whether by foreclosing a mortgage or suing on various guarantees. One thing which may not cross their minds, but can cause a delay in enforcement, is whether or not their lending entity is required to be authorized to do business in the State of New York.

Jeffrey Steiner, partner at McDermott Will & Emery.

As a matter of practice, many mortgage lenders set up a Delaware entity (usually a limited liability company) for their loan origination platform; some lenders even use a new single-purpose entity (SPE) for each loan. It is unclear how many of these lenders qualify such entities in New York State, not realizing that such failure may negatively impact a future enforcement action.