In Fine Print, Banks Require Struggling Homeowners to Waive Rights

In Fine Print, Banks Require Struggling Homeowners to Waive Rights
Today, May 09, 2011, 5 hours ago
by Paul Kiel

This story was co-published with Slate.

A few months ago, Bank of America offered Sergio Cortez of Staten
Island, N.Y., the help he desperately needed to stay in his home: a
break on his mortgage. Like millions of others, he was facing
foreclosure. But there was a catch buried in the fine print. Cortez
had to waive any possibility of ever suing the bank for anything
relating to the loan.

Cortez isn’t alone. While regulators have banned the practice, some
banks and others who handle mortgages have still been forcing
homeowners into a corner: You want a chance at saving your home? Then
you’ll have to waive your rights.

“It’s just unfair,” said Jane Azia, director of consumer protection
for the New York State Banking Department. “It puts borrowers in a
very vulnerable situation.”

We identified eight banks and other mortgage servicers who offer help
that limits homeowners’ ability to sue or fight foreclosure. When we
contacted them, they offered a variety of responses. Some said the
inclusion of the waivers had been a mistake and would stop. Some
argued that language that seemed to waive the homeowner’s rights
didn’t actually do so. One argued that a loophole in a rule barring
the practice meant their inclusion in certain agreements was proper.

Homeowners face a tough choice with these offers. Despite the
overwhelming need, it remains a struggle for borrowers to get help.
Any offer might be the last one to come along. Yet if a homeowner
signs away their right to sue, they might be forfeiting the best
leverage they have to get a lasting solution, borrower attorneys say.

The companies that handle mortgage payments and evaluate whether to
modify a loan or foreclose — known as mortgage servicers — have been
facing a rising tide of litigation by homeowners for their widespread
abuses and violations of law, giving them motivation to want to head
off more suits. The companies’ problems range from long delays,
errors, and lost documents when reviewing homeowners for modifications
to violations during the foreclosure process, such as the use of
so-called “robo-signers” and forging of documents.

“I’m troubled, but not surprised, that this is still occurring,” said
Rep. Maxine Waters, D-Calif., who has been pushing a bill to ban these
waiver clauses since 2008. “The mortgage servicing industry has been
broken for quite some time and needs substantial reforms.”

Borrower attorneys and counselors told ProPublica that such waiver
clauses, which were once standard practice for banks and mortgage
servicers, declined markedly after the Obama administration launched
its mortgage modification program in early 2009. The program forbids
the practice for government-sponsored modifications.

But fewer modifications are now done through the program, and some of
the industry’s old practices have been making a comeback — despite
regulators’ efforts. It’s impossible to say precisely just how common
the clauses are now, but attorneys said there was no doubt they were
seeing more of them lately. (If you’re a homeowner who received an
agreement with a waiver clause, ProPublica wants to hear from you.)

In New York, regulators banned waiver clauses in modification
agreements last year, but ProPublica found several examples of banks
and mortgage servicers like Bank of America continuing to include such
clauses in temporary payment agreements.

Recently, for example, two homeowners working with a legal aid
organization in the Bronx received temporary payment agreements from
two different servicers that required the borrower to waive any
potential defense to foreclosure. Both companies, Selene Finance and
Carrington Mortgage Services, specialize in handling troubled or
subprime loans.

What made the agreements particularly unfair, said Justin Haines,
director of foreclosure prevention at Legal Services NYC in the Bronx,
was that they required his clients to waive rights without receiving a
permanent solution.

The offers were forbearance agreements, which typically last three to
six months and are frequently used by servicers as short-term
solutions. They can be a prelude to an actual modification but offer
no guarantee of one if all the payments are made, and they explicitly
state that if a foreclosure is pending, it won’t be dismissed.

“The agreements are extremely one-sided and offer no real benefit for
the borrower,” Haines said. “If these borrowers did not have attorneys
to advocate for the removal of this language they would just be
regularly waiving their claims for nothing.”

The overwhelming majority of homeowners facing foreclosure don’t have
legal representation, said Diane Thompson of the National Consumer Law
Center. The legal aid organizations that do offer such services are
overwhelmed, she said, and “few homeowners facing foreclosure make
enough to hire an attorney.”

On the face of it, both agreements seem like clear violations of a
recent New York state regulation: “A Servicer shall not require a
homeowner to waive legal claims and defenses as a condition of a loan
modification.”

But Owen Blicksilver, a spokesman for Selene, argued that the
regulation forbade only loan modifications from including such
language, not the more short-term forbearance agreements.

State regulators said while that may technically be true, it didn’t
mean such clauses would be allowed. “Even if we had no rule, we would
find a problem with requiring borrowers to waive their legal claims in
a forbearance or a modification,” said Azia, of the New York State
Banking Department.

Despite the company’s stance, Selene did remove the clause from the
agreement after Legal Services NYC objected, Blicksilver said, because
“we were committed to a good faith resolution.”

Chris Orlando, a spokesman for Carrington, did not defend the
practice. “Any reference to such a waiver has been removed from our
documents.”

There have been other examples. In January, HSBC, which services
approximately 340,000 mortgages throughout the United States, offered
a client of Wendy Dolce, an attorney with the City Bar Justice Center
in New York, a payment plan with a similar clause.

“It’s something that I would never counsel a client to sign or
accept,” said Dolce.

Neil Brazil, a spokesman for HSBC, said the bank doesn’t include any
rights waiver in its standard modification agreements, but that
attorneys pursuing foreclosure on its behalf might include them when
offering a homeowner a forbearance plan. Brazil declined to say if
HSBC included the clauses more generally. He emphasized that HSBC had
been working with the borrower for over two years.

Bank of America, the country’s largest servicer, included similar
language in agreements late last year not only in New York, but
several other states.

It’s not a new practice for Bank of America. Back in July 2008, Rep.
Waters confronted Bank of America executive Michael Gross over the
practice during a congressional hearing. When Gross said he wasn’t
aware that the bank had ever required that borrowers waive their
rights, Rep. Waters read out an excerpt from a Countrywide agreement.
Bank of America had bought Countrywide that year.

After hearing the excerpt, Gross apologized and promised the issue
would “be under review by Bank of America very quickly.”

But ProPublica spoke to attorneys in New York, Maine, Connecticut,
Indiana and North Carolina who received agreements with waiver clauses
from Bank of America in the last year. In four cases, the clause was
word-for-word the same as the one discussed in the 2008 hearing, a
lengthy paragraph involving a release of all of Bank of America’s
“investors, employees and related companies from any and all claims.”

Bank of America’s language even waives the right to invoke a
California law that limits the scope of waiver clauses, “so that this
release shall include all and any claims whatsoever of every nature
concerning the loan.”

Cortez, the homeowner from Staten Island, had been trying to get a
loan modification since 2008, ever since his monthly payments had
doubled and his son, who lived in the home, lost his job. He said he
probably would have signed the forbearance agreement if he hadn’t had
legal representation, since any offer at all from Bank of America had
been so difficult to come by.

“I might have signed it, but that would have been worse for us. I’ve
heard of people who signed their three-month agreement and then don’t
get their modification and then get foreclosed on.”

When Cortez’s attorney objected to the clause, the bank initially
resisted removing it. At a court hearing in January as part of New
York’s foreclosure settlement process, Bank of America’s attorney said
it was standard language for the bank’s agreements and shouldn’t be
removed, said Diane Johnston, a paralegal at Staten Island Legal
Services. The agreement was eventually withdrawn. Having resubmitted
their documents once again, Cortez’s family is still waiting to hear
whether they’re getting a modification.

Rick Simon, a spokesman for Bank of America, said it wasn’t standard
to have a waiver clause in its agreements, and there’d simply been a
mistake.

Bank of America had stopped the practice back in 2008, he said, but a
“specialized unit of the home retention division” had been mistakenly
sending out agreements with the waiver language last year. “The
mistaken presence of waiver clauses in some agreements appears to be
limited to the unit and was discovered in December. The situation was
rectified in January.”

Asked about a North Carolina case where a modification agreement
offered in March contained similar waiver language — two months after
the problem was “rectified” — Bank of America’s Simon said that, too,
had been a mistake.

“In the interest of expediting the modification, a previous template
for a similar modification was used,” Simon said.

Rochelle Sparko, an attorney with the North Carolina Justice Center,
said the homeowner involved had been seeking a modification since
2008.

“In cases where a waiver is mistakenly included in a modification or
forbearance agreement, it is not the bank’s policy or intent to
enforce it,” said Simon.

Borrower attorneys say that in some cases there’s language in the
agreements that doesn’t constitute an explicit waiver but that could
have the intended effect of restricting a homeowner’s defense to
foreclosure.

GMAC, for instance, the fifth-largest servicer, which oversees about
2.5 million mortgages, includes a clause in its modification
agreements that the “Borrower acknowledges that Lender is the legal
holder of the owner of the Note and Security Instrument.”

Franklin Romeo, an attorney with Queens Legal Services, said he’d
objected to the clause on behalf of his client because there is some
doubt about who the legal holder is. Last September, GMAC suspended
foreclosure evictions and sales in 23 states after the revelation over
its use of “robo-signers,” employees who signed thousands of documents
each month falsely swearing that they’d personally verified the
details of the mortgage. In the case of Romeo’s client, one key
document is signed by one of those robo-signers.

“My concern is that, if the borrower were ever to face another
foreclosure in the future, the lender would argue that this paragraph
would preclude the borrower from challenging the way in which the
lender acquired the note and mortgage even though, in this case, we
believe the assignment transferring the mortgage to the lender was
faulty,” Romeo said.

Azia, of the New York State Banking Department, said given the
vagueness of the language, it wasn’t clear whether the clause was
meant to act as a waiver. But if GMAC relied on it to preempt a
borrower’s defense, she said, it would clearly be a violation of the
state rule.

GMAC did not respond to a request for comment. Romeo said the bank had
so far resisted removing the clause.

GMAC is not alone. Citibank’s servicing arm, the fourth-largest
servicer, included a very similar clause in a recent modification
agreement with another client of Queens Legal Services.

Mark Rodgers, a spokesman for Citi, said the language “does not waive
any rights to claims or defenses. It requires the borrower to
acknowledge that the lender is the owner of the note, and that should
the note be transferred, the new owner will be entitled to payments.
We believe the language is appropriate.”

A case in Florida shows how servicers can invoke such waivers to
smooth the way to foreclosure — even when servicer error is the
apparent cause of default.

Facing foreclosure in August 2008, Joseph and Myrna Strain of St.
Augustine, Fla., signed a modification agreement with American Home
Mortgage Servicing, Inc., a large servicer that handles about 430,000
mortgages. It contained a waiver clause.

“My client had no choice but to agree it,” said Chip Parker, the
couple’s attorney. “Otherwise they were going to foreclose on the
home.”

Parker says the Strains made the payments as agreed, but that American
Home did not credit them correctly, a common mistake by servicers. As
a result, American Home started the foreclosure process again in 2009.

On the Strains’ behalf, Parker raised a number of defenses to the
foreclosure. In response, the servicer’s attorney pursuing foreclosure
argued that the waiver signed in 2008 precluded any defense:
“Defendants expressly waived the right to challenge or contest the
foreclosure process.”

“They were clearly relying upon the waiver language to try and get
around all of the very complex securitization problems plaguing their
case,” said Parker. Furthermore, he said, it didn’t make sense to rely
on a waiver that was part of an agreement American Home had breached
by not properly handling the payments.

Early in April, shortly before the foreclosure suit was about to go to
trial, American Home’s attorney suddenly dropped it. The Strains,
meanwhile, are pursuing a countersuit.

American Home spokeswoman Philippa Brown said the company could not
respond to the specifics of the Strains’ case because it is in
litigation. She said American Home no longer includes that waiver
clause in its agreements but continues to use another clause from the
Strains’ agreement: That language says the borrower has no “defense to
the obligations of the note.”

Brown argued the language in the clause “is not a waiver” because it
did not expressly waive the borrower’s rights.

But Azia, of the New York Banking Department, said it sounded like a
waiver to her. “That’s exactly what a waiver is — a relinquishment of
your claims and defenses.”

It’s unclear whether such clauses are ultimately successful in
blocking homeowners’ challenges to foreclosures. Many attorneys said
the waivers might not hold up in court because they sought to waive
rights that couldn’t be waived (like whether the bank even had the
right to foreclose). The inherent unfairness of the tactic might also
get them thrown out. But all of them said it was particularly unfair
to homeowners without legal representation.

“It’s a horrible tactic by the banks because most homeowners give up,”
said Parker.

Were You Forced to Waive Your Rights to Get Help?
Today, May 09, 2011, 6 hours ago
by Paul Kiel

ProPublica recently learned of several cases where mortgage servicers
required homeowners to waive their rights as part of an agreement to
avoid foreclosure. In these cases, contracts provided by home mortgage
servicers included clauses requiring borrowers to waive rights or
state they had no defense to foreclosure.

Please Spread the Word
Share our request with your friends and family on Facebook, Twitter,
forums and list-servs.
It’s hard to tell how widespread this practice is. In some cases,
mortgage servicers insert ambiguously-worded clauses that could later
limit a homeowner’s defense to foreclosure.

Here are just a few examples of the clauses we found deep in the fine print:

From a Selene Financial Forebearance Agreement

From a Citi Modification

From a Bank of America Forebearance Agreement

Do any of these look familiar? If you have signed a forbearance or
modification agreement, please take a close look at the fine print and
then share your experiences with us. Simply email me with the subject
line “Waiver clause.”


Jake Naumer
Resolution Advisors
3187 Morgan Ford
St Louis Missouri 63116
314 961 7600
Fax Voice Mail 314 754 9086

20 Responses

  1. Does a mortgage servicer have to show proof that they are legally capable of modifying a promissory note? In other words, how can one party simply intervene and change the terms of a contract?

    Also, this is an interesting read via the OCC in regards to the unsound, non compliance foreclosing practices performed by Wells Fargo – dated April 2011.
    http://www.occ.treas.gov/news-issuances/news-releases/2011/nr-occ-2011-47k.pdf

  2. They’re doing this with the “Cash for keys” program as well. When Chase foreclosed on my home last year after demanding an additional $900 per month because Quicken Loans screwed up calculating escrow requirements (and I refused to pay since they wouldn’t even discuss it with me), Chase offered a couple of thousand in a cash for keys offer. To receive the money they wanted me to sign a 2nd document giving away my right to sue. I told them that was a different issue and if they wanted to settle the case I was open to discuss; I sent back the signed cash for keys document and they refused to pay if I didn’t sign their general release.

  3. Cheryl , regarding your Saxon to Ocwen change of servicers, Ocwen’s sole mission is to foreclose on people. They are basically a criminal organization. I had them about 7 or 8 years ago.
    *save all your letters and other correspondence
    *record all your phone calls
    *keep a daily log of goings-on
    *go on MERS for Homeowners, enter your MIN#, make a copy of your investor ID info every day at the same time, if possible
    *lastly, keep reading and learning

  4. These ***holes are counting on everyone not putting in the time and energy it takes to figure out the biggest scam/ponzi scheme ever perpetrated in history—but we are—

  5. Cheryl—

    I am not going to attempt to get a loan mod anymore from my servicer IndyMac…from what I’ve been reading on this site—it’s a set up! Why the heck would I pay a debt collector/servicer who is “pretending” that the money I will pay them will go to a “lender/owner”—which they have no proof of—not to mention they send me a “backdated”, fraudulent “substitution of trustee” document—which was never recorded in my county recorders office—and a long list of other nefarious issues that you can read about here on this site…
    Look on your paperwork—I bet the thing they are trying to get you to sign is a totally different “loan number” than what is on your original loan…not a good sign…

  6. I am in the process of finally getting the servicer “Saxon” to give us a modification. However, they are desperately trying to make us pay $9,600 in fines/penalities, adding on last years pymts, that they wouldn’t accept then, and this was all supposed to be done by 5/12/11 because the loan is being transferred from the servicer Saxon to Ocwen on 5/16/11. I have a feeling that the waiver described above, will be in any paperwork they give us to sign. Can I cross out that paragraph, initial it, and then sign it? The deal is a horrible one anyway. And I was hoping we could make a better deal once with Ocwen, but my family is afraid to chance it and wants to come up with the $9600 (which I feel we shouldn’t have to, because we would have never had these fines/penalties, if they didn’t do what they did to us!

  7. leapfrog

    Think the AGs need to do a whole lot more investigating. They have not touched the surface.

    But, as with any government agency — settlements — quick and fast — are always the protocol — i.e. — quiet the subjects.

    Any settlement without full investigation — and by bogus documents — is a settlement under fraud.

    AGs – who are you really representing? Under whose direction are you operating???

    Give us a say in your “settlements.” How are we being represented??? What are you doing with the information we provide to you???

    AGs — under whose control?? You are supposed to be representing us.

  8. Anon – I received a perm mod loaded with restrictive clauses – atty said do not sign. We are now in AP. Glad I didn’t sign, but it just angers me that this is one more dirty low trick the banksters try to get the desperate on the hook. Frankly, this reeks of an under duress, unilateral adhesion contract.

  9. leapfrog

    Sort of the point — but more, they want borrower to “agree” that false lender — is the real lender.

  10. Don’t sign anything until you’ve talked to a lawyer. Please check out my Bekker’s Foreclosure Friends (BFF); I have a seven-part post on how to find and vet lawyers to find the one that’s right for you. Chances are there are more catches than even the fine print you see, which could also include ripping you off on the $ they owe you.

    BTW, any lawyer that does not return phone calls is NOT A GOOD LAWYER. So totally forget about the ones you called if it’s been 24-48 hours since you placed the call.

    Here’s the link to my BFF FB group: http://www.facebook.com/pages/Bekkers-Foreclosure-Friends-BFF/107616659326933?sk=wall

  11. GMAC –“Borrower acknowledges that Lender is the legal holder of the owner of the Note and Security Instrument.”

    Anonymous: How can a lay-person homeowner really have TRUE knowledge that GMAC is the legal holder blah, blah? Just wondering.

  12. Oh boy… my husband and I purchased a home in 2005 with a Pay Option Pick a Payment Loan – Full Doc Loan with $200K down payment. Everything was fine, we were not in distress. We were unhappy about the market values, however we had no intention of selling. Bank of America began contacting us in 2009 sending letters and making phone calls stating our loan must be modified since we had a Pick a Payment Pay Option Loan orginated from Countrywide. When I said we did not want to modify, they said we had too. We were not late, had excellent credit and were not in distress. In fact I was downright insulting to Mr. John Davies on the phone, stating that why don’t you all help all the people who cannot afford their payments or who were tricked into horrible loans. He said and I quote” Per the senior loan service specialist at the time, said “Mamn you must modify your loan, we have instructions to modify all Countrywide Pay Option Loans and we can offer you a fixed rate at 4.75 for 10 years interest only. Knowing that we had a reset coming, and that we were upside down by $200,000 we decided to take their offer. They did not lower the principal however did shed the negatitive amortization part of the loan. A notoray came to the house and we signed the paperwork. We neved received signed copies back. Nothing is recorded in the county records.

    Your post above made me look at my note. OMG!!!Now, paragraph 10 of the Note called Waiver says:

    I and any other person who has obligations under this Note waive the rights of Presentment and Notice of Dishonor. “Presentment” means the right to require the Note Holder to demand payment of the amount due. “Notice of Dishonor” means the right to require the Note Holder to give notice to other persons that amounts due have not been paid.

  13. Propublica.com recently won a Pulitzer—I hope they really live up to it and get it right with their next article re. all this—with the TRUTH, the WHOLE TRUTH, and nothing but the TRUTH!

  14. Signing under Durress is a good defense and by them making you sign something you can not verify. Which is the Title companies job. Should signal to any reasonable person especially a Judge that something is fishy.

  15. The true negligence is with Congress and their disregard for the tax payer and home homer. Just remember, the members of Congress are from the banking systems and Goldman Sachs. The deck is stack against us all. Further the sweet and innocent Wells Fargo commercial that are being aired on you Television are nothing but a bunch of crap to lure in the unsuspecting home owner. The real terrorist are in the financial systems and the governments who protect them .

  16. It is impossible for people to get an attorney and why should they –

    If the regulatory banned the practice then why in the world would they not simply walk in the front door and “close them down” – That would stop the operation immediately.

    What is this deal about allowing banks to continue to disobey regulatory and other laws which affect the way they do business

    The true negligence is with the Congress, the law enforcement alledgedly known as the state attorney generals and the justice department

    They could stop it and put these people out of business which would be temporary because they would find the laws were written to be adhered to –

    Who is going to arrest the Congress, the Attorney Generals, and any other agencies for allowing banks to continue –

    Again – walk in the front door of that bank and shut them down – The banks know our law enforcement is not going to do that – so the people have no chance.

    Maxine Walters is without question – not the person who needs to be heading up the front on the banks operating illegally. Yet she is the only person speaking up – I wonder why?

    AS of right now – all of the great information provided to this site is not really going anywhere when you look at the percentages – What does it take? Whatever it is, it is not happening –

    The lawyers are making out like bandits while they rape and pillage the homeowners – all because our law enforcment cannot or will not do their jobs – And most importantly, they are buying time.

    Now Obama is attempting to work on the immigration issue while good American citizens are being terrorized daily with losing their homes that they would sign a modification agreement not to sue the lender for the lender’s wrong doing.

    Signing off of this site permanently –

  17. Now they are also trying to make homeowners complicit with their fraud —.

    GMAC –“Borrower acknowledges that Lender is the legal holder of the owner of the Note and Security Instrument.”

  18. The only waiver that should be here is the : “if you modify with the wrong bank the transaction is void”. What is going on? The typical wrong bank puts in language where you have no defense? Here’s your defense—sue them! Fight them! Do not modify a loan they do not own. Get an attorney. Sell alk the stuff in your life you don’t need and sue back!! Get a forensic audit right away and see who really has standing. That’s the only way you should modify. Period. Debi. 561-738-9339. May God bless those who deserve it.

  19. I have a similar story about Wells Fargo and McCalla-Raymer. Like many, I lost my home to foreclosure after 10 months of trying to obtain a workout, so they sold it on the courthouse steps last June…for more than I owed…even more than they said I owed…$30,000 more…but, the only way they will return the money THEY OWE ME is if I sign away not only my right to sue them for anything related to the surplus funds or related to the foreclosure or loan, but for ANY REASON WHATSOEVER! The way the hold-harmless agreement reads, if I walk into a Wells Fargo Bank or the foreclosure mill’s office and slip and break my neck or get assaulted by one of their employees, I cannot sue them…EVER!

    On June 1st, it will be one year since they sold my home to a third-party “investor”. The investor resold the house 3 months later for more than three times what I owed the bank. They basically gave away 23 years of equity I had worked so hard to build (7 years left on the mortgage…no refi or 2nd) for the lousy $6,000 they charged in additional fees.

    By the way, I cannot find a lawyer in Georgia willing to help. The few on your list for Georgia, Neil, must be so busy they can’t even return a phone call. If anyone is interested, I’d be glad to post or forward the agreement they expect me to sign. I haven’t signed it yet, but since I’m disabled and my wife has cancer, I could really use that money.

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