In these times of unprecedented pressure on lenders and servicers to settle foreclosure cases, the forbearance agreement--always a common approach in any event--becomes all the more meaningful and relevant. While there are compelling reasons why such agreements should be prepared by lenders' counsel, there are occasions where the mortgage holder may prefer, or feel compelled, to itself prepare the agreement.
To accommodate that, lenders and servicers will likely have forms available for that purpose. The broad variety of obvious permutations aside, regular questions from servicers suggest that some basics are still well worthy of presentation--even in the brief form necessitated by the format of these columns.
So, here are some concepts and provisions to consider when preparing a forbearance agreement. These thoughts presume that 1) the structure is that a borrower will be making up arrears over time and that the mortgage holder will forbear during that period; and 2) the length of this agreement will be modest to make it understandable and palatable to the borrower, to solicit brisk turnaround time and to keep expense to a minimum on both sides.
While the thoughts here also apply to commercial cases, those agreements will typically be far more detailed and nuanced. Therefore, the most compelling application of these concepts is to the residential foreclosure.
For the agreement to be best understood, it is helpful to begin with a series of "whereas" provisions. These outline the documents involved--i.e., the note and mortgage or such other documents as are relevant, recite the stage the case has achieved and the goal of the parties in entering into the agreement. It is appropriate for the initial paragraph of the forbearance agreement thereafter to incorporate by reference the whereas provisions as if they were part of the actual agreement section.
Acknowledgment of service/waiver of defenses
Servicers will recognize that borrowers are always ready to oppose a foreclosure claiming that they were not served or interposing hosts of defenses. If there is to be a forbearance, then the lender or servicer should know that such opposition has been disposed of, and so it is an essential part of a forbearance agreement to obtain an acknowledgment of service and a waiver of defenses.
That important point noted, in New York, for example, servicers are now barred from imposing a waiver of defenses upon borrowers in a forbearance...