Freedom Mortgage Corp. v. Demarco-Hudson

Background

Freedom Mortgage Corporation brought a foreclosure action against Mary DeMarco-Hudson concerning a residential mortgage on 164 and 166 Woodland Avenue in Yonkers, New York. According to the complaint, DeMarco-Hudson executed a $245,000 note in 1999 and a second note for $47,559.07 in 2002. The notes were consolidated into a single lien of $280,000. The complaint alleged that DeMarco-Hudson defaulted on a payment due July 1, 2016, and that the consolidated note was assigned to Freedom Mortgage on August 30, 2018.

Freedom Mortgage filed the action on January 17, 2019. DeMarco-Hudson did not appear, and the court entered a Default Judgment of Foreclosure and Sale on July 11, 2019. The opinion states that DeMarco-Hudson later entered Chapter 13 bankruptcy, and that Freedom Mortgage and DeMarco-Hudson entered into a loan modification agreement on May 9, 2023, which the plaintiff represented settled the case.

Motion to Vacate

Freedom Mortgage moved under Federal Rule of Civil Procedure 60(b)(5) to vacate the foreclosure judgment and also asked the court to cancel the January 23, 2019 Notice of Pendency. Rule 60(b)(5) permits relief from a final judgment when applying the judgment prospectively is no longer equitable.

The court found the motion timely. Although the foreclosure judgment was more than four years old, more than two years of that period involved DeMarco-Hudson’s bankruptcy. The court also found that the parties’ efforts to resolve the dispute were legitimate rather than dilatory because Freedom Mortgage filed the motion three days after the loan modification agreement was reached.

The court then balanced the settlement against the public interest in preserving final judgments. It concluded that the balance favored vacating the judgment because the parties had settled through the loan modification agreement, the judgment hindered their ongoing relationship, and nothing before the court suggested that the parties were attempting to misuse the court process. The court also noted the public-policy interest in keeping homeowners in their homes and rehabilitating mortgage lending relationships.

Notice of Pendency

Under New York Civil Practice Law § 6514(a), a court must direct cancellation of a notice of pendency when an action has been settled, discontinued, or abated. Because the court found that the parties settled through the loan modification agreement, it ordered that the Notice of Pendency be canceled.

Ruling

Judge Kenneth M. Karas granted Freedom Mortgage’s motion. The Clerk of Court was directed to vacate the July 11, 2019 Default Judgment of Foreclosure and Sale and terminate the pending motion. The Westchester County Clerk was directed, upon payment of proper fees if any, to cancel the Notice of Pendency as to both listed properties.