In New York, if a borrower executes a promissory note and then subsequently defaults under the terms of the note, the creditor, who holds the note, can sue the borrower for the full amount due under the terms of the note.  

If in addition to the note, the borrower executes a mortgage pledging real estate as security for repayment of the note then if the borrower defaults, the creditor, who holds the note, will decide if it will elect to sue on the note or foreclose against the property.  If the creditor chooses to foreclose and is successful in bringing the property to auction then assuming that the property is worth less than what is owed under the note, the creditor can seek a deficiency judgment against the borrower for the difference between the fair market value of the property and the amount owed under the note. 

A deficiency judgment can result in the creditor filing restraining notices against the borrower's bank accounts, executing on other assets and garnishing a percentage of the borrower's employment income.  

There are ways to minimize the chances of being personally liable for a judgment and and consulting with an experienced attorney can potentially save a judgment debtor from the wrath of a judgment creditor.   

The New York State Court of Appeals decided in Aurora Loan Services, LLC v. Taylor that a foreclosing plaintiff only needs to show that it has possession of the note at the time the foreclosure complaint is filed.  Thus, if the foreclosing Plaintiff has possession of the note, the mere fact that it does not have an assignment of mortgage is essentially meaningless.  The mortgage is merely incidental to the promissory note and the mortgage naturally follows the note; hence, whoever has possession of the promissory note will be entitled to foreclose even if an assignment of mortgage is in a different entity.  

Notwithstanding, the promissory note secured by a mortgage is a negotiable instrument and is governed by the Uniform Commercial Code (UCC).

UCC 3-202[1] provides: [n]egotiation is the transfer of an instrument in such form that the transferee becomes a holder.  If the instrument is payable to order it is negotiated by delivery with any necessary indorsement; if payable to bearer it is negotiated by delivery (emphasis added). 

Based on this requirement that the note be physically delivered, the foreclosing plaintiff must demonstrate that the subject note was physically delivered, and it will do this by typically submitting an affidavit by someone with knowledge attesting to the circumstances surrounding the delivery of the note. If the affidavit is not thorough enough then it may not serve as sufficient evidence to support the claim of possession and or delivery. 

Typically, the note is transferred more than once and the foreclosing plaintiff will usually provide allonges to prove the chain of ownership.  There are many technical issues that come into play with allonges, and if the foreclosing plaintiff is not careful, the action could be dismissed for lack of standing. 

Always seek out the advice of an experienced foreclosure attorney before it's too late!