By: M. Scott Thomas and Samantha Alves Orender
A reasonable workout often remains the prudent choice for defaulted commercial real estate loans even in the context of a pending (or nearly completed) foreclosure action. Thus, it is not surprising that we have seen a number of foreclosure cases where the bank and debtor entered into a modification agreement after obtaining a foreclosure judgment but before proceeding with the foreclosure sale. These post-judgment, pre-sale modifications can create needless difficulties and expenses if not documented properly. In the event of a subsequent default, can the bank merely ask the court to reschedule the foreclosure sale or must it first comply with any notice and cure provisions in the underlying loan documents? For that matter, given that the underlying mortgage merged into the foreclosure judgment, what exactly is being modified?