Texas Commercial Law Firm

4. Confirm no implied or actual “side agreements” between lender and borrower. A significant amount of foreclosure litigation arises from oversight of either express written agreements or correspondence between the lender and borrower which amount to express or implied modifications of the loan documents. Such agreements may have been effected years previously by a former mortgagor. Being out of the ordinary, such agreements are frequently overlooked until they have been breached. Examples of these kinds of agreements would be an agreement to provide an extended right-to-cure period, to provide notice to certain guarantors in advance of taking action against the borrower or to provide notice of default to a former owner of a property to be foreclosed who may or may not continue as an obligor. As an actual example of what may occur, several months after a foreclosure was completed on a VA loan which had been assumed from the original obligor, the VA contacted the original obligor and demanded payment of the deficiency. Under the terms of the loan agreement between the original obligor and the VA, the VA had the absolute right to collect this deficiency from whoever remained obligated on the debt.

At the time of the assumption, the original obligor, recognizing his continuing liability and endeavoring to protect himself, obtained a written agreement with the lender that he would be notified promptly upon the borrower's default and that he would be given an opportunity to cure the default, purchase the note or take other steps to protect his interest. Years later, when the then current owner went into default, the default manager handling the matter was unaware of the side agreement with the original obligor because the servicer's database software provided no field for the entry of such information.

Next Page>>> | Previous Page>>>