Mortgage Modification Agreement OK Without Lender’s Signature

Mortgage modification agreements are of course common settlement devices in modern mortgage or mortgage foreclosure commerce.  Because these represent mutual agreements, they should be signed by both the borrowers and the plaintiff (who may or may not be the lender or servicer but may be an assignee of the mortgage).

There is no doubt that foreclosing plaintiffs understand that they need to sign those mortgage modification agreements.  But ministerial errors can be made and it is possible – and it has happened – that the plaintiff’s signature does not appear.  Is this fatal to the enforceability of the mortgage modification agreement?  The answer is that typically it would be because it is not the mutual agreement of the parties; one party has not become bound.

But a new case offers a not unexpected exception to that rule.  [Bank of America, N.A. v. Terry, 177 A.D.3d 669, 111 N.Y.S.3d 636 (2d Dept. 2019)].

The borrower had moved to dismiss the foreclosure on the ground that it was based upon a loan modification agreement which was ineffective as not signed by the mortgage holder.  The facts, however, were that the loan modification agreement had indeed been signed by the borrower (although it was not recorded which is not meaningful) and the borrower made the payments provided for in the agreement for several years before he defaulted.  This was found by the court to be a demonstration that the borrower considered the agreement to be valid and effective and it was therefore held enforceable.

While this exception to the rule is certainly welcome, and it rescued the foreclosing plaintiff in the cited case, it also represents a fact pattern which may not occur very often and therefore will be unavailable to provide that salvation.  The procedure should still remain that the foreclosing plaintiff is well advised to sign the mortgage modification agreement.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2020), 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.