Loan Modification vs. the Courts TRAP Awaiting

Here is a trap waiting to happen. Often we have clients who come and say, the bank offered me a modification (that our office submitted and worked on, but the documents are very often sent to the property address). Great, but now what with the court or an upcoming sale date?

In Cowen Loan Servicing, LLC v. Jean Marie Delvar, 4D14-763, 2015 WL 8347300 (Fla. 4th DCA Dec. 9, 2015), the defendant/borrower alleged that he had been offered and accepted a loan modification by the bank; and was even making payments on this purported modification. The trial court judge found that this was a defense to the foreclosure action and ordered that the mortgage be altered per the terms of the purported loan modification.

The 4th DCA reversed though. The 4th DCA found that the trial court violated the Statute of Frauds (725.01) which says that “No action shall be brought . . . upon any agreement that is not to be performed within the space of 1 year from the making thereof . . . unless the agreement or promise upon which such action shall be brought, or some note or memorandum thereof shall be in writing and signed by the party to be charged therewith or by some other person by her or him thereunto lawfully authorized.” In plain English, if a contractual agreement cannot be performed in under 1 year, and may involve real estate, it MUST be in writing and signed by the parties.

Now, while most loan modifications are offered to the borrower in writing, this is an exercise that it is IMPERATIVE that when your attorney asks you for copies of documents that you get them in immediately. A court generally is not going to rule favorably upon an oral representation of some unknown agreement and some unknown timetable, as there must be and agreement in writing to be a valid modification of the obligation under the note and mortgage. 

Moral of the story using this case as a footing? When your attorney says “we have a hearing send me the documents I need to attach to my motion or for the hearing” get them in ASAP!!!

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