So How Good Is That Forbearance Agreement?

The servicer enters into a stipulation or forbearance agreement allowing the borrower time to reinstate or payoff (as the case may be), or, an action may be halted to allow the borrower to sell the property – among a host of other settlement scenarios.  The agreement approach is designed to reserve all rights for and protect the mortgage lender or servicer.  Does a well-drafted agreement serve that purpose?  The answer is typically “yes” and a new case happily confirms the concept [Mortgage Electronic Registration Systems, Inc. v. Davis, N.Y.L.J., Nov. 16, 2005, at 20, col. 3 (Sup. Ct., Queens Co., Polizzi, J.)]

The story here is a bit of a wild one, but in a certain sense typical of the things that borrowers (and others) bent on forever holding up a foreclosure are likely to do.  Here, the borrower was named as a defendant but the servicer later learned that he died.  The complaint was amended to add a Carritha Davis as the supposed administrator of the borrower’s estate together with a number of others who were apparent heirs.

There was a default, the case moved to judgment of foreclosure and sale and then Carritha Davis obtained an order to show cause to stay the sale, or set aside any foreclosure sale which may be conducted, to vacate the judgment, for leave to serve an answer and to transfer the case to the Surrogates Court (where estate matters are handled).  While the court allowed the sale to go through, it stayed delivery of the deed.  Supporting her requests, Davis claimed that a number of the other defendants were not properly served, were infants or were under a disability.

What she had not announced to the court, though, was that she had previously approached the plaintiff and asked for an adjournment of the foreclosure sale for 90 days to allow her to voluntarily sell the property, subject to the approval of the Surrogates Court.  The servicer agreed, but wisely reduced the understanding to a written stipulation.  And in that stipulation, Davis waived any and all defenses she had, as well as those on behalf of the other defendants who she represented in the role of natural parent and guardian.  Among the defenses waived was jurisdiction (that is, process service).

Well, that stipulation sealed the fate of the objectant.  She had waived any right to claim lack of service and therefore had no basis to attack the foreclosure sale.  The court saw through this one.  The stipulation correctly served its purpose.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), 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.