HSBC Bank USA, National Association v. Whyte

Background

HSBC Bank USA, National Association, acting as trustee for a mortgage-backed trust, sued Claudette Whyte and other defendants to foreclose on a mortgage encumbering property owned by Whyte in Mount Vernon, New York. The complaint alleged that Whyte signed a $448,592 note and mortgage in 2005, that the mortgage was later assigned to HSBC, and that Whyte stopped making payments required by a 2014 loan-modification agreement beginning with the payment due September 1, 2022.

Whyte was served with the complaint on November 6, 2024, but did not answer or otherwise respond. The clerk entered her default on February 13, 2025. After HSBC sought a default judgment and judgment of foreclosure and sale, Whyte responded. The court treated her response as a motion to set aside the entry of default under Federal Rule of Civil Procedure 55(c). The court denied that motion.

Legal standard

A court may set aside an entry of default for good cause. The court considered three factors: whether the default was willful, whether setting it aside would prejudice the opposing party, and whether the defendant presented a potentially valid defense. The court explained that defaults are generally disfavored, but a defendant must still explain the failure to respond and identify a defense sufficiently connected to the allegations.

Willfulness

The court found that the willfulness factor favored keeping the default. Whyte did not deny receiving the complaint. She argued that she was pursuing a loan modification and was confused because of a 2010 foreclosure action. The court found that these circumstances did not explain why she ignored the lawsuit for approximately seven months. It also noted that the loan-modification correspondence gave her no clear reason to believe another modification would be granted.

The court separately described repeated missed deadlines and filing difficulties involving Whyte’s attorney. It concluded that Whyte’s failure to respond was deliberate, or at least sufficiently egregious and unexplained to constitute willfulness under the governing standard.

Prejudice

The court found that the prejudice factor favored setting aside the default because HSBC had not shown that the delay caused lost evidence, made discovery more difficult, or created a greater opportunity for fraud or collusion. The court nevertheless gave this factor little weight in light of the willful default and the absence of a meritorious defense.

Defenses

The court found that Whyte had not shown a meritorious defense. Her arguments focused primarily on the earlier foreclosure action. The court determined that the 2010 action had been disposed of through a 2014 stipulation of discontinuance entered after the parties finalized a loan modification. The court therefore rejected the argument that the earlier case remained pending.

The court also rejected Whyte’s challenge to HSBC’s standing to foreclose. It found that HSBC adequately showed physical possession of the note before starting the current foreclosure action. The court further noted that Whyte did not dispute that she had defaulted. Arguments concerning the form of HSBC’s affidavit and its payment records also did not establish a defense.

Finally, the court rejected Whyte’s statute-of-limitations argument. It concluded that the 2014 loan modification effectively revoked any acceleration from the 2010 foreclosure action. In addition, Whyte continued making payments under the modified agreement until her 2022 default. The court held that the limitations period therefore did not bar the current foreclosure action.

Ruling

The court denied Whyte’s motion to vacate the clerk’s entry of default. The opinion states that the balance of the factors favored entry of a default judgment. Because Whyte had not objected to HSBC’s proposed judgment calculations, the court allowed her until August 6, 2025, to raise any objections, with HSBC allowed to respond by August 13, 2025. The opinion does not state that the proposed foreclosure judgment itself was entered on July 30, 2025.