In contrast to other recent well-publicized decisions, a New Jersey state court has held that, in order to seek foreclosure of a mortgage that has been securitized, a lender need not demonstrate actual physical possession of the note memorializing the underlying debt. In Bank of America, NA v. Alvarado, BER-F-47941-08 (N.J. Super. Ct. Ch. Div. Jan. 7, 2011), the court held that the plaintiff was entitled to summary judgment striking the borrower’s answer, dismissing her counterclaim and entering default, even though the plaintiff’s predecessor, which was the original lender, had lost the note before transferring its interests to the plaintiff. The court found that this result was compelled by the doctrines of equitable/common law assignment and unjust emrichment.
The Alvarado decision marks a departure from prior holdings over the past year, in which courts throughout the nation, including New Jersey, have been unwilling to allow lenders to enforce their security interests absent a demonstration of actual physical possession of the note. By way of example, in Bank of New York v. Raftogianis , 417 N.J. Super. 467 (Ch. Div. 2010), the court dismissed the plaintiff’s complaint, without prejudice, upon a determination after trial that the plaintiff could not prove it had possession of the note at the time the complaint was filed. In In re Kemp , 440 B.R. 624 (Bankr. D.N.J. 2010), the court expunged the creditor’s proof of claim in a bankruptcy adversary proceeding where the creditor never received possession of the original note from the originating lender.
