Forbearance Agreements - A Double-Edged Sword

by

Hi My name is Brian Mahany, I am the founder and principal of MahanyLaw, a national boutique law firm that represents commercial borrowers and high net worth individuals.

We are talking today about forbearance agreements. Potential clients often come to us when they are facing financial uncertainty. Banks will frequently ask these borrowers to sign forbearance agreements. Forbearance is a special agreement between the lender and the borrower to delay foreclosure.

Borrowers usually are eager to sign these agreements if for no other reason than to buy time. Often, however, they are not in the borrower’s best interest.

The typical forbearance agreement contains a waiver. In return for getting a few extra weeks of time, the borrower waives all claims against the lender. No matter how bad the bank’s misconduct and wrongdoing, with the stroke of a pen, all that wrongdoing can be wiped clean. The bank gets a clean slate and the borrower still must pay.

Worse, many forbearance agreements require the borrower to pay exorbitant fees, provide additional collateral and / or personally guaranty the debt.

The bottom line? Most of these agreements do a tremendous disservice to the borrower.

If you are a commercial borrower or high net worth individual and find yourself in trouble with a bank, call us. We have been helping folks just like you for over 30 years.