Tuesday, November 2, 2010

Bank of America Modification Agreements – Be Careful - You are Waiving Your Rights

Recently, I was reviewing a Band of America Modification Agreement and I was surprised by a clause in the Agreement relating to consideration. Consideration is a legal concept that forms the foundation of an enforceable contract. It is a prerequisite to the formation of a contract that both parties offer something to one another (consideration) before a contract can be binding. In a loan modification agreement, the banks consideration is their agreement to reduce your payment to an amount you can afford.  What caught my attention is the consideration that the Bank is asking you to provide. In exchange for the bank reducing the payment, the borrower is waiving a right they would have in defending a foreclosure lawsuit where the note is lost or destroyed. This is a relinquishment of a right that could save your home from foreclosure if you re-default. Unfortunately, the facts are that 55% to 75% of modified loans are expected to re-default within 12 months. Be careful of signing anything Bank of America offers you. Have a professional review any agreement the Bank presents to you before signing it.