Readers may find our title both obvious and redundant. It is – although not always – but a new case returns the assertion to its usual and welcome status. [Inland Mort. Capital Corp. v. Realty Equities NM, LLC, 71 AD.3d 1089, 900 N.Y.S.2d 79 (2d Dept. 2010)].
When a foreclosing party enters into a settlement agreement with a defaulting borrower, be it a stipulation, forbearance agreement, maturity extension agreement or howsoever it might be denominated, the lender will require that the borrower waive any and all claims and defenses it may purport to have – at least this is certainly a recommended provision in any such agreement. The reason is manifest: if a lender accommodates a borrower by allowing some compliance not otherwise in accord with the mortgage documents, then it should not have to suffer a later assault in the case if the agreement fails. In other words, the borrower should not be afforded the chance to pounce with a whole arsenal of supposed defenses after the lender had compromised and made concessions. So this is standard.
The question then might arise, is a waiver of defenses in a written agreement enforceable? Appropriately, and not unexpectedly, case law has always confirmed that the language was indeed enforceable; it means what it says. Recently, though, there was a case at the trial court level (Supreme Court in New York) where a judge voided a forbearance agreement on the ground that it was oppressive, that while a borrower had waived all its rights, such a formulation would not be tolerated.
The law is clear, however, that a settlement agreement – a contract — must be enforced as written unless there has been fraud or other elements which could void a contract. In the offending decision, the court just did not like what happened and did not adopt applicable case law. These things happen at the trial court level as courts from time to time seek to fashion a remedy that they find palatable in the ever more volatile and contentious foreclosure arena. That is why some cases need to be appealed and litigators learn to take this with equanimity, if without pleasure.
It is therefore appreciated when further case law reaffirms the critical point. And in the new case mentioned it was at the appellate division level. There, a forbearance agreement was entered into and the borrower waived the right to assert any defenses, set offs or counterclaims against the lender. When the borrower defaulted on the forbearance agreement (hardly unusual), the foreclosure continued but the borrower interposed defenses which necessitated a motion for summary judgment. While the trial court refused to grant summary judgment, the appellate division reversed, finding that because the borrower had waived its right to assert defenses, the newly minted defenses were therefore insufficient to raise a triable issue. Thus, summary judgment had to be granted.
Aberrant decisions will be encountered from time to time, but lenders and servicers can be safe in knowing that a waiver of defenses in a forbearance agreement will ultimately be enforced.
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.