In September 2024, the Appellate Division, Second Department reversed the Judgment of Foreclosure and Sale in this matter and remitted the action to this Court "for a new trial on the issue of standing." The Appellate Division explained that "A plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that, when the action was commenced, it was either the holder or assignee of the underlying note. Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident." (Bank of NY Mellon v Selig, 2l 3 AD3d 894, 895-896 [internal quotation marks omitted]). The Court found that defendant had "raised issues of fact warranting a new trial on the issue of standing. . . ."

Accordingly, on November 21, 2024, this Court held the trial directed by the Second Department. The Court reserved decision, and directed the parties to submit memoranda of law, as well as the transcript of the trial. Although the Court offered to allow the parties to submit reply memoranda, they declined. The parties timely submitted their memoranda on December 23, 2024, and this Decision and Order follows.

At the trial, the Court began by allowing the parties to present arguments regarding the [*2]Note, which had been precluded previously by a different Court because plaintiff failed to produce it to defendant in discovery. Counsel for defendant maintained that since the Note had been precluded back in November 2017 — which counsel for plaintiff admitted in an affirmation in 2019 - it remained precluded. In contrast, counsel for plaintiff argued that the Court has the power to set aside previous orders under CPLR § 4404.^[FN1]

The Court finds that that section of the CPLR does not apply here, because the preclusion order was not "after a trial." Instead, the Court finds that CPLR § 5015(a) applies. In relevant part, that section provides that "The court which rendered a judgment or order may relieve a party from it upon such terms as may be just . . . upon the ground of . . . newly-discovered evidence which, if introduced at the trial, would probably have produced a different result and which could not have been discovered in time to move for a new trial under section 4404." See, e.g., Eaderesto v. 22 Leroy Owners Corp., 101 AD3d 450, 450, 955 N.Y.S.2d 328, 329 (1st Dept. 2012) ("The motion court erred in denying that part of defendants' motion to vacate the self-executing preclusion order."); Nieves v. Citizens Advice Bureau Jackson Ave. Fam. Residence, 140 AD3d 566, 567, 32 N.Y.S.3d 507, 508 (1st Dept. 2016) ("In order to be entitled to vacatur of the order, plaintiff was required to show a reasonable excuse for his failure to comply with the order and a meritorious claim."); Fed. Nat'l Mortg. Ass'n v. Banks, 198 AD3d 1222, 1224, 156 N.Y.S.3d 496, 499 (3d Dept. 2021) (motion to vacate preclusion order "is addressed to the court's sound discretion, subject to reversal only where there has been a clear abuse of that discretion.").

Plaintiff's counsel argued that while the Note had been missing, it was recently located. Plaintiff then offered the testimony of its witness, Dion Kala. Mr. Kala is employed by Celink (also known as Compu-link Corporation, hereinafter "Celink"). Mr. Kala testified that his title is Vice President, Foreclosure Litigation Manager. He testified that his company only services reverse mortgage loans, and "for trials, depositions, hearings or any settlement conferences, I'll review the loan file records and documents to prepare." Mr. Kala testified that for the loan in question, the master servicer is plaintiff, Wendover Financial Services Corp. ("Wendover"), with his employer, Celink, as the subservicer. He explained that the master servicer is "the company that has the servicing — the rights to service the loan," but then to do the "direct servicing," they hired Celink.

Mr. Kala testified that for servicing activities, the records are maintained by Celink, although some of the records are held by the custodian. He further testified that he has access to the servicing records under their proprietary system, Reverse Serve. He also testified that this system has prior servicer records as well. Mr. Kala testified that Wendover was the prior servicer for this loan.

With respect to the Note, Mr. Kala testified that a copy of the Note is a part of the Celink servicing records, kept in the regular course of business. He testified that although he had seen the copy before, electronically, at the trial was the first time that he was seeing the original Note. [*3]Mr. Kala testified that he knew where the original Note came from, BNY Mortgage Company, Inc. (the originating lender) ("BNY"). When asked on voir dire if he knew whether BNY had had physical possession of the original Note at commencement of the action, Mr. Kala testified that he "believe they did." He testified that "it appears that the - they received the original mortgage when the loan was originated and there is no records [sic] to show that it was a release but it was not located prior."

Mr. Kala further testified that BNY continued to hold the Note because "They originated this note and at the time, Fannie Mae ^[FN2] allowed originators to hold the collateral." He testified that although plaintiff sought to locate the Note, "BNY could not locate the note. . . . I believe it was located, if I am correct, April of this year when the collateral that BNY was holding for Fannie Mae was moved to Deutsche Bank for custodial services."

Having heard the testimony on this topic and observed the witness, whom the Court found to be very credible throughout his testimony, the Court finds that it is empowered to vacate the previous preclusion order. There is no evidence before the Court that plaintiff's failure to locate the Note previously was willful, or even truly negligent, since it was only located when documents were being transferred from one custodian to another. This constitutes a reasonable excuse. As for the meritorious defense, this is more complicated. The only explanation that plaintiff offered as to why the original Note remained with BNY for decades after Fannie Mae became the owner was Mr. Kala's testimony that "at the time, Fannie Mae allowed originators to hold the collateral." Plaintiff did not offer any documents to substantiate this explanation. Nor did plaintiff explore this cursory statement any further. This is an inadequate explanation, insufficient for the Court to find that Fannie Mae possessed the original Note at commencement. The Court thus finds that the original Note cannot be used to confer standing on Wendover.

That is not the end of the inquiry, however. It has long been settled that "A plaintiff has standing to maintain a mortgage foreclosure action where it is the holder or assignee of the underlying note at the time the action is commenced. Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident." Lakeview Loan Servicing, LLC v. Swanson, 231 AD3d 801, 803, 220 N.Y.S.3d 356, 359 (2d Dept. 2024).

In this action, there is no dispute that Fannie Mae is the owner by assignment. There is some dispute as to whether the assignment was from Wendover directly to Fannie Mae on February 23, 1998, as Exhibit 3 demonstrates, or whether it was from Everbank Reverse Mortgage LLC on March 9, 1998 to Fannie Mae, as Exhibit 6 ^[FN3] indicates. Either way, Fannie Mae owns the loan, and has since shortly after its inception in 1998, long before commencement of this action by Wendover.

The issues then become whether Wendover, as servicer of the loan for Fannie Mae, was [*4]empowered to commence this action in its own name, and whether a witness employed by Celink could testify on Wendover's behalf. The Court finds that there can be no dispute that Wendover is the servicer for Fannie Mae, as demonstrated by multiple exhibits and Mr. Kala's testimony, as discussed below. Mr. Kala testified that "Wendover owns the servicing for this loan. Celink services this loan for Wendover." Specifically, (1) Exhibit 6, the Fannie Mae Reverse Mortgage System Purchase Advice by Servicer Report, lists Wendover as the servicer; (2) Exhibit 4 is the subservicing agreement between Wendover and Celink, dated November 2005, that, in Mr. Kala's words, "has all of the terms and conditions as to how Celink is supposed to service the loan." Mr. Kala testified that this agreement provides that Celink "does all of the servicing for this home equity conversion mortgage."^[FN4] Mr. Kala also testified that although this agreement might have been amended over the years, it has not been canceled or revoked. He further testified that "Celink does the foreclosure activity on this loan," including recordkeeping; (3) Exhibit 5 is the Special and Limited Power of Attorney between Wendover and Celink that Mr. Kala testified "allows us to service this reverse mortgage loan according to our guidelines." A review of this document shows that it empowers Celink to execute all documents "in connection with the subservicing of reverse mortgage loans as defined in the Subservicing Agreement dated November 1, 2005 . . . entered into between Wendover Financial Services as Client . . . and Celink as Subservicer. . . ;" (4) Exhibit 7 is a Limited Power of Attorney between Fannie Mae and Wendover that empowers Wendover to execute any documents necessary for, among other things, a foreclosure action, or "the conveyance of property acquired through foreclosure sales including endorsement of the note and the conveyance of property pursuant to a default and exercise of a power in a mortgage;" (5) Mr. Kala testified that "Wendover is the master servicer and Fannie Mae owns the loan," that "Celink subservices for Wendover," that Celink maintains the records and services the loan for Fannie Mae, and that Celink would be relying on the records provided by Fannie Mae for this type of servicing agreement. Mr. Kala also testified that "Wendover stopped servicing in 2006 and they hired Celink to service this reverse mortgage loan. . . ."

Having reviewed the testimony of Mr. Kala as well as all of the exhibits admitted into evidence, the Court makes the following findings of fact. Mr. Kala was a very credible witness. He was forthright, clear and readily comprehensible when discussing the relationships among Fannie Mae, Wendover and Celink. With many of the documents admitted into evidence — all but the ones that the parties stipulated to - counsel for defendant voir dired Mr. Kala, ensuring that all of the documents admitted into evidence qualified as business records. The Court finds that there is ample evidence that Fannie Mae does own the loan. There is also ample evidence that Wendover is the master servicer for the loan, empowered to take all actions necessary for a foreclosure, with Celink as the subservicer and keeper of all of the business records for the loan.

To the extent that defendant claims that Wendover did not have the authority to commence the action in its name, or that Celink did not have the authority to have its employee testify at trial (because the limited powers of attorney only provided for the execution of [*5]documents), the Court rejects these contentions. Research has revealed a plethora of cases in which servicers and subservicers commenced actions and provided testimony on behalf of owners, including some cases cited by defendant for the opposite principle. See, e.g., US Bank Nat'l Ass'n v. Cusati, 185 AD3d 870, 128 N.Y.S.3d 24 (2d Dept. 2020) (servicer's testimony at trial rejected only because power of attorney was dated four years after commencement of action); Bank of New York Mellon Tr. Co., N.A. v. Baskin, 218 AD3d 633, 635, 192 N.Y.S.3d 624, 627 (2d Dept. 2023) (testimony of loan servicer sufficed to establish standing); U.S. Bank Nat'l Ass'n v. Glasgow, 218 AD3d 717, 194 N.Y.S.3d 40, 44 (2d Dept. 2023) (plaintiff established standing through the testimony of "the servicer for the subject loan, and exhibits admitted at trial"); U.S. Bank Tr., N.A. v. Bank of Am., N.A., 201 AD3d 769, 772, 159 N.Y.S.3d 516, 519 (2d Dept. 2022) ("U.S. Bank Trust demonstrated Caliber's authority to act on its behalf by submitting the limited power of attorney."); Deutsche Bank Nat'l Tr. Co. v. Silverman, 178 AD3d 898, 900, 114 N.Y.S.3d 110 (2d Dept. 2019) ("The affidavit of merit from a representative of the plaintiff's servicing agent, accompanied by a power of attorney demonstrating the authority of the agent to act on behalf of the plaintiff, in which the representative averred that she had acquired personal knowledge of the matters discussed in her affidavit by reviewing the loan servicer's business records, was competent evidence. . . .").^[FN5]

The Court thus finds that Mr. Kala, an employee of the subservicer Celink, was competent to testify on behalf of plaintiff, Wendover. The Court also finds that Wendover had the power to commence this action on behalf of the owner of the loan, Fannie Mae. Accordingly, the Court finds that plaintiff has standing.

The foregoing constitutes the decision and order of the Court.