In a significant ruling on August 26, 2026, the Appellate Division of the Supreme Court of the State of New York reversed a foreclosure judgment against AG2 Equities, Inc. The court's decision affects the way mortgage foreclosures are handled, particularly regarding the evidence required to support claims for amounts due on loans.
The case, titled Deutsche Bank National Trust Co. v. AG2 Equities, Inc., was filed under docket number 2024-05590. It involved a dispute over a mortgage foreclosure initiated by Deutsche Bank National Trust Company against several parties, including AG2 Equities, Inc. The ruling is expected to influence future foreclosure actions in New York.
The dispute began in December 2015 when Deutsche Bank filed to foreclose on a mortgage for a property located in Brooklyn. Valerie Samuels, one of the defendants, did not respond to the complaint in a timely manner. As a result, Deutsche Bank sought a default judgment against her and an order of reference. In July 2017, while the motion was pending, Samuels transferred the property’s title to AA Kodosh Holding, LLC, which is the nonparty-appellant in this case.
The Supreme Court initially granted Deutsche Bank's motion in February 2018. However, the situation escalated when the bank moved again in August 2023 to confirm a referee's report and obtain a judgment of foreclosure and sale. Kodosh opposed this motion, leading to the May 8, 2024, order and judgment that the appellate court later reversed.
The Appellate Division's ruling stated that the order and judgment of foreclosure and sale were reversed on legal grounds. The court found that the referee's report, which was critical to the foreclosure judgment, was not adequately supported by the necessary evidence. The judges involved in the ruling were Colleen D. Duffy, Paul Wooten, Laurence L. Love, and Susan Quirk.
The court ruled, "the referee's findings with respect to the amount due to the plaintiff were based on an affidavit of an employee of the plaintiff's loan servicer. However, the plaintiff did not submit the business records upon which that employee relied in computing the amount due, and therefore, the employee's assertions regarding the amount due constituted inadmissible hearsay."
This ruling emphasizes the importance of presenting proper documentation in foreclosure cases. The court highlighted that computations based on unproduced business records lack probative value, which means they cannot be used as reliable evidence in court.
The impact of this decision is significant for both lenders and borrowers. It reinforces the requirement for banks and financial institutions to provide clear and verifiable evidence when pursuing foreclosure actions. This ruling may lead to more rigorous scrutiny of the evidence presented in similar cases and could potentially delay foreclosure proceedings if lenders fail to meet these standards.
Furthermore, this decision could set a precedent for future cases involving mortgage foreclosures in New York, emphasizing the necessity for lenders to ensure that their claims are backed by solid documentation. Borrowers may find some relief, knowing that they can challenge foreclosure actions on the grounds of insufficient evidence.
Looking ahead, it is unclear if Deutsche Bank will appeal this ruling to a higher court. The option to appeal remains open, and the outcome could further influence foreclosure laws and practices in New York. Additionally, there may be related cases pending that could also be affected by this ruling.