Oral Mortgage Loan Modification

Last updated on: May 24, 2022

When faced with foreclosure, some borrowers seek to modify their mortgage loans in order to get more affordable monthly payments. These negotiations are often complicated and require a lot of back and forth communication between the borrower and the loan servicer. Unfortunately, the homeowner may be so happy to receive a modification that he forgets to make sure the formalities are handled properly.


Late last year, a Florida court held that a homeowner could not rely on an oral modification offer from the bank as a valid agreement, even though the homeowner had made payments relying on the oral offer. The court based the decision on what is known as the statute of frauds, which requires certain contracts that cannot be performed or completed in a year, such as the modified mortgage loan, to be in writing in order to be considered enforceable. Because the homeowner was not likely to finish paying off the mortgage – even under any new proposed terms – in under a year, the loan modification contract had to be in writing.


The homeowner in this case had made payments under the terms of the oral modification, and the bank accepted them, however, the court nevertheless found that because the payments would have continued beyond a year the agreement needed to be in writing. It was unclear if the homeowner would be entitled to receive those payments made in reliance of the new agreement back, because after all, the homeowner still owed on the mortgage.


Written contracts are important because they set out the terms agreed to by all parties and provide a reference as to what the parties intended when they decided to contract with one another. In most cases, contracts also contain language that requires any future modifications to be in writing, also to ensure that the changed terms are well documented. Homeowners should want all agreements between them and their loan servicers in writing, in large part to protect themselves.


Homeowners should always be careful when dealing with representatives from the loss mitigation departments of their loan servicer. Taking notes of what is said during telephone conversations and noting which employee a homeowner spoke to can help document the process. It is important for the homeowner to not take any adverse actions, such as stopping their monthly mortgage payments, because the homeowner is advised to do so while on the telephone with a representative. If any terms are offered as part of the loan modification process, it is crucial that the homeowner request documentation and review the terms in writing, preferably with the homeowners’ own attorneys, before making a decision to accept them.


Let Us Assist You

If you are seeking a loan modification in order to avoid foreclosure, you may need help navigating the process in order to walk away with a deal that benefits you. For guidance and more information on how you should handle a loan modification, contact the North Miami foreclosure attorneys at Charlip Law Group, L.C. for a consultation on your case.

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