Case Summary:
The debtors and their mortgage lender negotiated a forbearance agreement which contemplated that they would make reduced mortgage payments for a six-month period pending consideration of a loan modification. After the forbearance period, the lender denied the modification request and informed the debtors that they were obligated to pay the balance of the previously reduced payments. The debtors contended that those payments had been deferred to the end of the mortgage. The court found that a forbearance agreement is a contract and must be interpreted in accordance with its terms. As the agreement was drafted by the lender and was ambiguous as to the final treatment of the deferred payments, it would be construed in favor of the debtors. As such, they were entitled to treat the deferred payments as part of the unpaid balance due on the maturity date of the loan rather than as mortgage arrears which would need to be paid through the chapter 13 plan.
Statute/Rule References:
11 U.S.C. § 1322(b)(3)
Key Terms:
Contract – Rules of Construction
Loan Modification