Foreclosing A Mortgage When The Note Has Been Lost

In order to transfer ownership of a mortgage, the Promissory Note must be physically delivered - but sometimes, Notes get lost.

If a Promissory Note is delivered to a new owner who then loses it, the new owner must provide a Lost Note Affidavit stating that the Note was validly transferred and thereafter lost. As long as the original Note was actually delivered to the new owner and lost subsequent to the transfer, the Lost Note Affidavit and an indemnification will enable the Plaintiff to foreclose and no “standing” issue will arise.

If, however, the Note was lost prior to the transfer and thus was not physically delivered to the Plaintiff, the Lost Note Affidavit must also state that the person who transferred the Mortgage was in possession of the Note before it was lost, and a separate written agreement evidencing that the parties intended to transfer ownership of the mortgage, as required by the Uniform Commercial Code (UCC § 3-804), must be submitted as well.

In Citibank, N.A. v. Lin, 2007 NY Slip Op 31428 (U), the plaintiff commenced a foreclosure and submitted a motion to appoint a Referee along with a Lost Note Affidavit. Since the Lost Note Affidavit merely stated that the Note had been lost, but failed to include any additional specific facts and circumstances with regard to the loss, the court denied the Plaintiff’s motion.

Where the Note was lost prior to the transfer, the Lost Note Affidavit must give specific information regarding the background investigation into the location of the note, how far the investigation progressed, who the last known note holder was, and the last time the Note was seen. If the information provided in the affidavit relies on books and records, the affiant must testify that they are employed by the company, that the records were contemporaneously made in the ordinary course of business and that the affiant has access to those records.

In addition to establishing the circumstances of the loss, whether prior or subsequent to the transfer of the Mortgage, proof of the Note’s terms are also required. The best way to establish the Note’s terms would be to produce a copy of the Note, however, if a copy is unavailable the Lost Note Affidavit should include the following terms that were included in the Note:

  • Name of Borrower
  • Address of Borrower
  • Date of Note
  • Original amount of the Note
  • Amount currently due under the Note
  • Interest rate
  • Payments required

Finally, in addition to the Lost Note Affidavit, the plaintiff will also be required to indemnify the defendant, his heirs, personal representatives, successors and assigns against loss, including costs and expenses, by reason of any claims on the “Lost” Note.