Forbearance Agreement And Acceptance Of Payments


15 June, 2009


Mortgage Lender and Servicer Alerts

Especially in these extraordinary times, forbearance agreements are more common than ever, and for good reason.  Lenders may sometimes wonder whether these agreements are truly enforced in accord with their terms, particularly when so much that is designed to protect lenders is under dangerous assault.   The answer is consistently “yes” and a new case confirms that again-with a further twist.  [JPMorgan Chase Bank v. Agnello, _A.D.3d_, 878  N.Y.S. 2d 397 (2d Dept. 2009)]   (As we often observe, it is rarely easy for lenders. The trial judge was wrong; it took an expensive appeal to state the obvious.)

Here, lender and borrower entered into a forbearance agreement whereby the full sum due on the mortgage was required to be paid on a date certain.  (That date was February 1, 2006.)  Although the borrower defaulted and did not pay the mortgage balance on that date (as so often happens) the borrower nonetheless continued thereafter remiting regular monthly payments.

A lender’s dilemma under these circumstances typically gives pause.  Can the lender continue to take the installments without fear that somehow there will be a waiver or that the forbearance agreement will be rendered meaningless?  The judge below thought not, but the appeals court sagely saved the day.

The helpful ruling was that the lender’s mere acceptance of monthly payments made after February 1, 2006, did not serve to extend the forbearance agreement which specifically provided that the full balance was due on that date unless an extension was agreed to in writing.  There being no extension, the agreement controlled and the lender was protected.

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.