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.