Financial contracts carry many terms and conditions that you should evaluate carefully prior to signing the contract. In many cases, borrowers do not have awareness of the right they forfeited when signing the contract. Many financial institutions now require homeowners seeking a mortgage to waive their rights as a borrower. This, of course, affords the lender a great advantage should you find yourself in a financial situation where you cannot meet the obligations associated with your mortgage.
Borrowers participating in a loan modification will generally have to sign a waiver of borrower’s rights as part of the refinancing process for the loan modification. In most cases, this waiver is a separate form or addendum to the mortgage contract. The most important clause in the waiver of borrower’s rights acknowledges the lender’s right to accelerate the debt and also offers the lender the power of attorney to sell your property through non-judicial foreclosure upon default. Additionally, this form typically waives your rights to any judicial hearing related to a future foreclosure.
This waiver of legal rights is part of the closing paperwork you must sign at the time you close your mortgage loan. In many cases, this form is buried within the paperwork you sign, and the lender is not mandated to explain the consequences of giving up those rights. Consumer rights groups equate this waiver to predatory lending practices that take advantage of unsophisticated customers. While some states such as New York have banned the use of waivers of borrower's rights as of 2011, others states such as Georgia continue to allow the use of this form.
Benefit to the Lender
This waiver is not a clause that will mutually benefit both parties. The lender assumes all the rights associated with the contract once you sign this form waiving your rights. Some predatory lenders, for example, use this clause to foreclosure your property if your payment is a single day late. Again, once you sign this form, the lender can proceed with the foreclosure without any type of hearing. If the lender misplaces your payment or makes a clerical error, you would have the burden of proving the lender made the error to avoid losing your home after signing this form.
Ask for the Removal of the Waiver
Attorneys often advise that you should try to negotiate with your lender to remove this waiver from your loan contract. If the lender is not willing to remove the waiver, you should try to shop around and find another lender that will accommodate your wishes. It is very important for you to go over the contract thoroughly before you sign it and fully understand all the terms, conditions and waivers associated with the loan.
- Blackburn & Adair, LLC, Georgia Law Offices: Waiver of Borrower's Rights
- "Principles of Real Estate Finance"; Charles Long; 2010