NEW YORK–In a case involving Municipal Credit Union, a New York court has ruled that standard settlement conference rules don’t apply in foreclosure cases when the borrower is already deceased.
The Appellate Division, First Department issued its ruling in the case, Municipal Credit Union v Thomas.
According to Mortgage Professional, Edward Watkins took out a loan from Municipal Credit Union (MCU), using his Bronx condo as collateral. Watkins died in early 2019, and his estate, managed by executrix Kim Thomas, stopped paying the condo’s common charges.
“MCU knew about Watkins’s death and Thomas’s role as executrix,” Mortgage Professional reported. “In February 2022, MCU began a foreclosure action, naming Thomas and others as defendants. Thomas was served with the legal paperwork in March 2022 but did not respond. MCU, following what’s often the standard process, asked the court for a settlement conference – a step usually required in New York residential foreclosures.
Several Letters Sent
“Over the next year, MCU sent several letters to the court about the conference and eventually participated in one in April 2024,” the report continued to explain. “Meanwhile, West Fork Funding, LLC acquired the condo through a separate foreclosure by the condo board, which was pursuing unpaid common charges.”
After the court conference, MCU moved for a default judgment and an order of reference, Mortgage Professional said, with the court granting the motion in August 2024 and requiring MCU to notify the new owner, West Fork. MCU did not serve West Fork. Despite this, MCU moved for a judgment of foreclosure and sale, stating it had complied with settlement conference requirements, the report explained.
West Fork argued Municipal Credit Union missed the deadline to move the case forward, as under New York law, a lender must take action within one year after a defendant’s default or risk having the case dismissed as abandoned. The trial court sided with MCU, but West Fork appealed.
Ruling is Reversed
“The appeals court reversed the lower court. It held that the usual settlement conference rules did not apply because the borrower was deceased and not living at the property when the foreclosure action started,” Mortgage Professional reported. “The time MCU spent seeking and participating in a settlement conference did not pause the one-year deadline. Because MCU did not take the necessary steps within that year, the court dismissed the foreclosure action as abandoned.”
