Lender loses foreclosure case after court finds key rule doesn’t apply – could you be at risk too?
A New York court has ruled that standard settlement conference rules don’t apply in foreclosure cases when the borrower is already deceased.
On November 13, 2025, the Appellate Division, First Department, decided Municipal Credit Union v Thomas – a case that matters for anyone handling foreclosures involving estates. Here’s how it unfolded and why it’s important for mortgage professionals.
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. 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. Over the next year, MCU sent several letters to the court about the conference and eventually participated in one in April 2024. 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. The court granted the motion in August 2024, but required 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.
West Fork opposed, arguing that MCU missed the deadline to move the case forward. 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.
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. 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.
This decision is a reminder to pay close attention to timelines and requirements, especially when dealing with estates. The rules for foreclosures involving deceased borrowers are different, and missing a deadline can mean losing the case. Municipal Credit Union v Thomas highlights the importance of knowing when standard procedures do not apply and acting quickly to protect your interests.
This case is a clear example of how details matter in foreclosure actions, especially when estates and property transfers are involved. For anyone in the mortgage industry working in New York, it’s a decision worth understanding – and a call to stay alert when the usual rules don’t fit.
