Tuesday, February 23, 2016

Your loan modification can erase bank mistakes in the documents.

Distressed homeowners who enter loan modifications with their lenders may be wiping away past mistakes made by the bank. These mistakes my be simple clerical errors, but sometimes they can assist a defaulted homeowner in defending a foreclosure.

In a recent case handled by this office the homeowner relied upon inconsistent dates in her documents to defend against a foreclosure. She made motions to the court attacking the legitimacy of the documents, and the claimed lien on her property, based on the inconsistencies--the transactions and loan dates did not match the dates of the instruments. Her argument was that the loan she took was not secured to her real property, and thus the bank should not be allowed to foreclose.

However, the borrower had already modified her loan once. The foreclosure was triggered by her inability to meet the terms of the modified loan. This, too, is common.

Her motion to prevent the foreclosure failed. The judge found language in the loan modification demonstrated the borrower's acknowledgement that any mistaken dates in the original documents were merely the result of clerical error, and that she ratified the existing lien. As a result, the bank was allowed to foreclose.

I can't think of a clearer example of a later contract being used to clean up the ambiguities and mistakes in drafting the prior contract.