In the CFPB’s recently issued Summer Supervisory Highlights it was noted that examiners have found a customary rider in one state to be in violation of the Consumer Financial Protection Act’s prohibition on deceptive acts or practices. It is generally understood that this commentary is referring to the Georgia Waiver of Borrower Rights customary rider.
In the Supervisory Highlights, the CFPB notes that examiners have previously held borrower waivers of rights to be deceptive where reasonable consumers could construe the waivers to bar them from bringing federal claims in court related to their mortgages. These have included waiver provisions in some home equity installment agreements, or in forbearance, loan modification, and other loss mitigation options in the mortgage servicing context. The highlight observes, “Regulation Z states that a ‘contract or other agreement relating to a consumer credit transaction secured by a dwelling…may not be applied or interpreted to bar a consumer from bringing a claim in court pursuant to any provision of law for damages or other relief in connection with any alleged violation of federal law.’”
The Georgia Waiver of Borrower Rights is a customary document that has been provided in Georgia since the 1970s. It has been provided at least in part in reaction to the case of Law v. U.S. Dep’t of Agriculture, 366 F.Supp. 1233 (N.D. Ga. 1973), which held that defendants’ efforts to foreclose under contractual powers of sale in conformity with state law denied the property owner due process. The waiver is provided to ensure the borrower is on notice that he/she will not be sued first prior to the exercise of the non-judicial power of sale. The Georgia Acknowledgment and Waiver of Borrower Rights, includes the following acknowledgment provisions:
- Right to accelerate debt and power given to sell by nonjudicial foreclosure without any judicial hearing and no notice outside of that required by the security instrument
- Waiver of any and all rights under the 5th and 14th amendments to the U.S. Constitution, any provisions of a state constitution, or any other law which purports to provide rights to notice and judicial hearing prior to a lender’s exercise of their rights under the security instrument, except those required by the security instrument
- The mortgagor has read all provisions of the security instrument and understands those provisions
- All waivers are done knowingly, intentionally and willingly
- All provisions of the waiver rider are incorporated into the security instrument.
The Supervisory Highlights noted that Regulation X, at 12 C.F.R. § 1024.41, requires mortgage servicers to provide borrowers with certain notices in the loss mitigation context and borrowers may bring suit to enforce those provisions. Reviewing the Georgia Acknowledgment and Waiver of Borrower Rights against this provision, CFPB examiners have found that a reasonable consumer could understand the provision to waive the consumer’s right to sue for such notices in a nonjudicial context and dissuade such consumer from bringing otherwise cognizable federal claims. As a result, the waiver provision has been found to be deceptive.
To comply with the findings by CFPB examiners, DocMagic will be updating the Georgia Acknowledgment and Waiver of Borrower’s Rights Rider (Form ID GAAWBR.MSC) to remove item (2) which includes waiver by the borrower of their constitutional or other legal rights, as well as item (4) which acknowledges that all waivers of rights are done so knowingly, intentionally and willingly. The Closing Attorney’s Affidavit will be updated as well to reflect the changes to the borrower’s acknowledgement. As the form will no longer include a specific waiver of rights by borrower, the name of the form is also going to be updated to now be the “Georgia Acknowledgment of Borrower’s Rights Rider”.
Further, while DocMagic is updating the form to comply with the CFPB’s findings so that we may continue to provide the form in default packages, DocMagic customers are encouraged to review the need for this form in Georgia closings, including with their investors. DocMagic reserves the right to remove the form from all Georgia closing packages in the future in response to the CFPB’s examination findings.
Should you have any questions about this change, please contact the DocMagic’s Compliance Department.
