The Appellate Division recently issued its decision in Bank of America, N.A. v. Princeton Park Associates, L.L.C. and considered whether acceptance of late payments by a lender modified the terms of the loan documents and constituted a waiver of the lender's rights. The defendant appealed the chancery judge’s decision granting the lender’s motion for summary judgment.

The defendant argued that the lender accepted its late payments, the terms of the loan had been modified and, therefore, no default occurred. The Appellate Division noted that the mortgage documents prohibited all modifications, except for a written agreement executed by both parties. The Appellate Division then determined that the fact that late payments were accepted did not modify the loan documents or constitute a waiver of any of the bank's rights.

The decision also highlights a common defense raised by borrowers in default related to standing. The defendant borrowed $19.5 million from GMAC Commercial Mortgage Corporation in 2001. The loan documents were assigned in 2001 to LaSalle Bank, N.A. as trustee for the Registered Certificate Holders of GMAC Commercial Mortgage Securities, Inc., Mortgage Pass-Through Certificate Series 2001-C2. The loan documents were securitized pursuant to a Pooling and Servicing Agreement which provided for GMAC to act as a master and special servicer with respect to the loan pool. Bank of America became the trustee of the loan documents after it merged with LaSalle, and on May 2, 2006, GMAC, still the master and special servicer, changed its name to Capmark Finance Company (“Capmark”). Then, in 2009, Capmark sold and assigned its loan servicing portfolio, including its interest in the loan to Berkadia Commercial Mortgage LLC (“Berkadia”).

The preceding paragraph will likely give you a headache; however, it is crucial for lenders and borrowers to follow this paper trail. A party seeking to foreclosure a mortgage must own or control the underlying debt. Here, Bank of America had standing as an allonge properly transferred the loan documents from GMAC to LaSalle, and Bank of America had copies of all of the original loan documents. Bank of America had its ducks in a row, but that is not always the case!  Copies of the opinion can be requested by emailing