That might be great news but before you sign on the dotted line, read the fine print to make sure your lender is not asking you to waive your legal rights in exchange for the supposed help.
ProPublica, a nonprofit news organization, reports several mortgage servicers have been sneaking waiver clauses into loan modification and forbearance agreements that limit homeowners' ability to fight foreclosure or sue the lender for any reason related to the loan. The practice is not allowed in government-sponsored modifications such as HAMP and is banned in some states, including New York.
Not surprisingly, that hasn't stopped servicers from including the waiver clauses in their contracts.
"We've been seeing those waiver clauses since the very beginning," says Thomas Ice, a foreclosure defense attorney in Royal Palm Beach, Fla.
Ice says he often advises homeowners to refuse signing the waiver but many think they have no bargaining power and "feel this is their last opportunity to save their home, no matter what the consequences."
They think by signing the agreement they will reach a final resolution with the lender but that's not always the case. If you happen to default again in the future, the waiver would make it much easier for your lender to take over your property, he says.
"Some waiver clauses are particularly onerous in that, when the bank feels your payment is even one day late (which is something that they determine in their sole discretion), they can move for summary judgment on your house without even telling you or notifying you about the hearing," Ice says. "So if your payment gets lost in the mail, or the bank incorrectly logs in the date of receipt, you may not know about it until the sheriff comes to put your furniture out on the street."
A typical waiver will read as clear as: "borrower has no defenses or counterclaim," but it can also come in less obvious forms such as "representations," says attorney Daniel Kaskel in Boca Raton, Fla.
That could be a paragraph stating the borrower acknowledges the particular lender is "the holder and the owner of the note" in dispute. It could be a statement saying the lender "is not in default" and has committed no wrongdoing and "the borrower has no defenses to lender’s claims." Any of those could harm a borrowers' ability to fight the lender in court.
What should you do if you're asked to sign a waiver clause?
Attorneys say you should try to negotiate with the servicer and ask it to remove the clause. You might be surprised to see that even though some lenders may resist it at first, they'll agree to your terms.
"We all agree that generally, homeowners shouldn't sign these," says Ginna Green, a spokeswoman for the Center for Responsible Lending. "Asking folks to waive their rights as a condition of a loan modification is a red flag and a sign -- among many -- that lawmakers and regulators need to keep their eyes on this industry."