County Court Considers Bank's Possession Rights In Context Of A Mortgage That Is Securitised Or Subject To Covered Bond

• Published date: 10 October 2025
• Subject Matter: Finance and Banking, Debt Capital Markets, Charges, Mortgages, Indemnities, Financial Services, Securitization & Structured Finance
• Law Firm: Herbert Smith Freehills Kramer LLP
• Author: John Corrie, Ceri Morgan and Nihar Lovell

The decision considers who has legal standing to enforce a debt where the lender retains legal title but has assigned the beneficial interest

The County Court has allowed a borrower's appeal against a Deputy District Judge's (DDJ) decision to strike out his defence to a possession claim, finding that the borrower's arguments concerning the securitisation of the mortgage (and the bank's entitlement to enforce it) raised a real prospect of success: Lloyds Bank plc v Cook [2025] EWCC 43.

The decision will be of interest to financial institutions as it illustrates how securitisation (or transfer pursuant to a covered bond) can create uncertainty over who holds the legal standing to enforce a debt, especially when the lender retains legal title but assigns the beneficial interest (ie the right to receive payments) to a third party. There is tension between two leading Court of Appeal authorities in this area. The decision in Three Rivers DC v Bank of England [1996] QB 292 suggests that where the beneficial interest is assigned, the assignor must either sue in a representative capacity or join the beneficial assignee to the proceedings. However, the decision in Paragon Finance plc v Pender [2005] EWCA Civ 760 supports the view that the legal owner retains the right to enforce the mortgage without joining the assignee, even if the beneficial interest has been transferred.

In the present case, the court found that this legal uncertainty rendered the securitisation issues unsuitable for summary determination and held that the DDJ had erred in striking out this part of the borrower's defence. Consequently, the decision may indicate an area of risk for lenders that have assigned the beneficial interest in mortgage loans, but wish to retain the right to enforce...