In the case of Brown v. Nationstar Mortgage reported in the New York Law Journal on June 26, 2015, Brown had brought a lawsuit seeking to enjoin the enforcement of a judgment of foreclosure which resulted in the sale of his home. In addition, he sought to stop a proceeding which attempted to remove him from his home after the foreclosure sale had taken place. His lawsuit requested the court rescind the sale of his property and find a mortgage modification agreement he had previously entered into with Nationstar Bank was effective and enforceable.

The court found the only issue which needed to be dealt with, because all of the other relief requested by Brown had previously been litigated, was whether the mortgage modification agreement should be enforceable.

Justice Daniel Barrett found Brown had reasonable notice of the foreclosure proceedings. He stated, however, he was “perplexed by the inactivity concerning this matter.” Mr. Brown had testified he had received a letter from the respondent offering him a mortgage modification. The letter required he sign a mortgage modification agreement and agree to make a payment for the agreement to become effective. He testified that he complied with all of the requirements the bank had requested. In spite of entering into a valid mortgage modification agreement with the bank, a foreclosure sale was conducted and Nationstar Mortgage bought the property. They thereafter served Brown with a 90 day notice to remove himself from the premises.

Mortgage Modification Agreement is Valid and Mortgage Set Aside

Justice Barrett ruled there was a valid mortgage modification agreement because Brown had complied with all of the required terms of the agreement. He then sought to place the parties in the position they would occupy if the agreement was performed pursuant to all of its terms. The judge therefore directed both parties continue to perform under the terms of the agreement and, in addition, there be a two year interest free period.

Conclusion

The entering into of a mortgage modification agreement does not stop lawsuits from moving forward. Banks usually hold the lawsuits in abeyance to see if the terms of the mortgage modification agreement are complied with. However, sometimes the outside counsel representing banks in foreclosure lawsuits have no idea the banks are entering into a mortgage modification agreement. They therefore continue with the foreclosure process which can result in the sale of the home and eviction of the family that lives in the home. To make sure the attorneys representing the bank in the foreclosure proceedings are aware of what is going on between the bank and the homeowner, it is important to provide documentation to the attorneys for the bank with regard to the existence of the mortgage modification being underwritten and being accepted.