A Virginia appeals court has ruled that a mortgage servicer can legally foreclose on a property even after allegedly making a verbal promise to the borrower that it wouldn’t foreclose.

The case involved a family that fell behind on its mortgage payments and was enrolled by the loan servicer in the Home Affordable Modification Program. The borrowers claimed that they were told by the servicer, via telephone, to disregard the foreclosure notice while their mortgage modification was pending approval. The servicer denied the claim and foreclosed on the home on the grounds that the borrower filed incomplete documents.

Ballard Spahr attorneys Joel E.Tasca, Glenn A. Cline, and Daniel JT McKenna wrote in the firm's Mortgage Banking Update that that court "affirmatively found that the promises may have been improper, but that they could not form the basis for a claim because the statute of frauds renders oral promises affecting real property unenforceable. Many borrowers claim that their lender made oral misrepresentations concerning the ability to avoid foreclosure. Invocation of the statute of frauds is another tool potentially available to lenders to defeat these common claims."

Related Practices

Consumer Financial Services
Mortgage Banking