Is a Loan Modification Agreement Valid With Only One Signature?

The financial crisis beginning in the first decade of the 21st century brought with it the issue of home foreclosure for many American families. Faced with the difficulties of unloading foreclosed homes in a crippled real estate market, some lenders became resultantly willing to modify loans, making them more affordable and reducing the risk of borrower default. Exactly who has to sign off on a given modification depends on a number of factors.

How Mortgages Work in General

While the rules vary from state to state, a mortgage is generally an arrangement where an owner puts up his real property as collateral for a loan. In addition to a security agreement giving the lender the right to seize and sell the collateral in case of default, the borrower signs a promissory note agreeing to repay the entire loan amount. This obligates the buyer to the total amount of the loan after default, even if the property doesn't sell for enough to cover the balance. The terms of the loan -- interest rate, duration, monthly payment -- will be contained within that promissory note.

Lender's Signature

A promissory note is basically a contract between you (or you along with your spouse or guarantors) and the lender to repay a given amount of money over a specified period of time at a specified interest rate. A contract can be modified only by the agreement of all parties, so if you're trying to get a loan modified, your modification agreement needs to be signed by someone authorized to act on the lender's behalf. This may be your loan officer or some other company representative. An agreement signed only by you, even if the lender drafted it and sent it to you, won't be valid.

Your Signature

Just being able to produce a loan modification agreement signed by the lender won't necessarily protect you. The lender will probably require you to sign off on the modification agreement, as by nature these arrangements involve a material variation to the essential terms of the original contract. A written agreement bearing only one side's signature by itself is nothing more than an offer to enter into that agreement; if you haven't signed it, you can be held to have never accepted that offer, which means no new contract was ever formed. As such, your original loan terms still stand.

Your Spouse and Guarantors

Anybody who's going to be obligated on the modified loan will have to sign off on it. If you qualify for the modified loan on your own and your lender is willing to let your husband or wife or any cosigners out of their obligation, they won't have to sign. Without their signatures, the lender can't go after them if you default. As a practical matter, the lender will therefore refuse to approve a loan modification agreement with only your signature, unless no one else but you will be obligated on the loan.