This sounds too obscure, but hang in there. Have we mentioned before that nuance and minutiae in the New York foreclosure dictates (especially for home loan cases) are a field of mines exploding in the path of foreclosing lenders? Of course we have, but it all continues to surprise nonetheless, although the case reported on here actually solves a problem in exposing one of the danger areas. [HSBC Bank, USA, N.A. v. Seidner, 159 A.D.3d 1035, 74 N.Y.S.3d 282 (2d Dept. 2018)].
The issue arises out of the conflict between two major foreclosure mandates: One, to move for a default within one year, the other to participate in the settlement process. If you think about it, both of these things might not be able to be accomplished.
As to the one year default obligation, after all defendants have been served in the foreclosure, and if any of them is in default, should a plaintiff fail to take proceedings for entry of a judgment within one year of default a judgment will not be entered. Rather the complaint shall be dismissed as abandoned. This dismissal is mandatory, although there is an exception if the failure to timely seek a default is supported by sufficient cause for the inaction, meaning in actuality both a reasonable excuse for delay and demonstration of meritorious cause of action.
Lenders and servicers will immediately recognize the difficulty in moving for a judgment within one year, the settlement process aside. First, after possibly lengthy process service, there must be an application for an order of reference, then the computation, and only then the motion for judgment. The rescue here is that because application for appointment for a referee is a requirement in a foreclosure and is a prerequisite to a judgment, that’s the same as having applied for a judgment so that is not an issue. (This does not mean it is not litigated – it is – but lenders win on the point.)
We turn now, though, to the other mandate, which is that a settlement conference be conducted after process service is complete. This depends upon when the court schedules the conference. Even if that is done with dispatch, there can be reasons for the conferences to be postponed (such as the borrower not having counsel or not having appropriate papers) and lenders can request adjournments as well for various reasons. And that a conference is held does not mean repeated meetings will not be needed or directed by the court.
It is readily discernible that the conference process can take more than a year. So if the matter is released from conference after a year, but a default has not been pursued, the action may be subject to mandatory dismissal. Here is where new case law confirms that this really is not a problem. The ruling was that if a request for judicial intervention in a matter subject to mandatory settlement conference is filed within the one year deadline needed for the default, the time thereafter to move for the default judgment is tolled while settlement conferences are pending.
If it didn’t work this way lenders would face an insurmountable imposition so it probably had to be decided in any event – and happily it was.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2018), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.