The Consumer Financial Protection Bureau (CFPB) Successor in Interest Rules took effect on April 19th, 2018. Interestingly, what the successor in interest rules say boils down to some pretty simple requirements.
To explain, a spouse or child essentially stands in the original borrower’s shoes for purposes of the Mortgage Servicing Rules and as a “consumer” for the purposes of the Truth in Lending Act. They are treated no differently than the original borrower except that they are not personally liable for the debt. If you are a confirmed successor in interest, here is the CFPB rule.
Under this rule, you can ask for account information, request a payoff statement, and conduct business general similar to the loan’s original maker. You also have the same rights to loss mitigation. The protocol for handling borrower requests related to errors in mortgage servicing is outlined in Regulation X, which emphasizes the importance of written notices from borrowers and the servicers’ obligations to investigate and respond within determined time frames for the borrower’s mortgage loan.
Second, the Successor in interest rule applies to both TILA and RESPA which govern modifications and how the loan is handled. These are Consumer protection modifications to the existing Mortgage Servicing Rules. The Successor in Interest rules enables the servicer to deal with widows and divorced parties without violating the FDCPA. It protects surviving spouses who acquire property and prevents foreclosure simply because the servicer of the mortgage cannot communicate with the new owner.
Certain information requests may be considered ‘confidential, proprietary or privileged’ and thus do not require compliance from the servicer.
CFPB Successor in Interest Rules for Widows & Divorced Persons
Understanding Successor in Interest
⎆ Definition and Importance
A successor in interest is an individual who inherits or is awarded ownership of a property following the death or divorce of the original borrower. This can include a spouse, child, or other relative. The importance of recognizing a successor in interest lies in ensuring that these individuals can manage the borrower’s mortgage loan account effectively. The servicer shall ensure that all requests for information or error notices related to the borrower’s mortgage loan account are handled promptly and accurately. They are granted the same rights as the original borrower, excluding personal liability for the debt. This means they can request information, seek loss mitigation options, and handle other mortgage-related matters without facing unnecessary obstacles.
⎆ Legal Implications for Widows and Divorced Persons
For widows and divorced persons, the legal implications of being a successor in interest are significant. The CFPB rules ensure that these individuals are not unfairly treated or left in the dark about their rights and responsibilities. When a borrower passes away or a marriage ends in divorce, the successor in interest can step into the borrower’s shoes, allowing them to manage the mortgage loan without facing foreclosure due to communication barriers with the servicer. This protection is crucial in preventing the loss of a home and ensuring that the successor in interest can maintain the property and fulfill any necessary obligations.
Successors in interest rules cover transfers to a potential successor in interest within the family.
Anyone who collects or services the loan must obey these rules whether they are credit unions, small lenders, or large. There are no exceptions. So, the law essentially requires the debt collector to treat a confirmed successor in interest no different than the original borrower. In fact, successor in interest rules cover a joint tenant, a relative of the borrower, spouse, or child of the borrower. It covers these persons whether the transfer was due to death or due to divorce. This can be helpful for persons who otherwise might lose a home simply because the lender will not treat them as a borrower. It is especially helpful in Chapter 13.
Successor rules and procedures require servicers to confirm and communicate with any potential or confirmed successor in interest:
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Upon notice of death or transfer.
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Provide written requests for documentation to persons for supporting documents that are reasonably required to support a request.
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The statute requires the servicer to provide a “written description of the documents the servicer reasonably requires to confirm the person’s identity and ownership in the property” within ten days 12 CFR 1024.36. This is part of the information request notice, which details the necessary components of such requests, including the servicer’s obligations to acknowledge and respond.
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If the documents need further support, the servicer must notify upon receipt what added documents are necessary to confirm the person’s status as a successor in interest.
A valid information request must include identifiable borrower information and a clear statement of the information being sought. The servicer must follow procedural requirements and time limits to ensure thorough compliance when responding to such requests.
The CFPB outlines the Server’s responsibilities to comply with the requirements for successors in interest.
The following comes from the frequently asked questions at the CFPB
Do servicers have a responsibility to know if a confirmed successor in interest is in bankruptcy for purposes of complying with the early intervention and periodic statement requirements?
ANSWER (UPDATED 3/20/2018): Yes. Under Regulation X, § 1024.30(d) and Regulation Z, § 1026.2(a)(11), confirmed successors in interest become “borrowers” for purposes of the early intervention requirements and “consumers” for purposes of the periodic statement provisions. Because confirmed successors in interest become “borrowers” and “consumers” for the relevant parts of Regulation X and Regulation Z, servicers need to know whether confirmed successors in interest are in bankruptcy and may want to include them in any normal checks they utilize to identify borrowers in bankruptcy.
QUESTION 2: Do the modifications to the periodic statement required for borrowers in bankruptcy apply if the borrower is a confirmed successor in interest in bankruptcy?
ANSWER (UPDATED 3/20/2018): Yes. Under Regulation Z, § 1026.2(a)(11), confirmed successors in interest become borrowers for purposes of the periodic statement provisions, and so the periodic statement modification requirements for borrowers in bankruptcy in § 1026.41(f) would apply to the periodic statements supplied to that confirmed successor in interest in bankruptcy. For general information about the modifications to the periodic statement or coupon book when a borrower is in bankruptcy, see section 5.10 of the Mortgage Servicing Small Entity Compliance Guide.
Servicers must provide contact information, including a telephone number, for further assistance when responding to information requests or notices of error. This allows borrowers to easily seek additional help or clarification regarding their queries.
Additionally, servicers must provide information including a telephone number to facilitate further assistance in writing or when conducting an investigation into requested information.
The servicer must share some information with a successor in interest but not everything.
The lender does not have to share personal information about the original borrower’s contact or financial information. However, the lender does have to provide the following information, including examples of documents typically accepted to establish identity and ownership interest:
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Escrow accounts, payments, and account balances;
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Mortgage servicing transfers and mortgage transfers;
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Error resolution;
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Information requests;
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Force-placed insurance;
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Early intervention;
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Loss mitigation;
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Post-consummation events;
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Payoff statements; and
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Periodic Statements.
Deadlines for servicer responses do not include excluding legal public holidays.
Certain information requests may be considered overbroad or unduly burdensome if they demand an unreasonable volume of documents or require excessive time and resources to fulfill.
Requests made on a payment form supplied by the servicer do not need to be regarded as formal requests for information.
When responding to requests from a potential successor in interest, servicers must follow procedural requirements to confirm the identity and ownership interests of these requestors.
Servicers must provide property and contact information when responding to information requests.
A qualified written request, as defined under RESPA, is a specific form of written communication from a borrower that outlines reasons the borrower believes an error has occurred or includes essential details necessary for the borrower to request information.
A qualified written request that requests information relating to the servicing of the mortgage loan must be treated as a formal request.
Such qualified written request must include essential borrower details and articulate the specific information being sought, thereby obligating the servicer to respond under set regulatory timeframes and procedures.
An unduly burdensome information request may not require compliance from the servicer.
Servicers are required to provide a written response acknowledging receipt of an information request from a borrower within five days.
Successor in Interest Rights and Responsibilities
⎆ Overview of Rights
As a successor in interest, you inherit several crucial rights that enable you to manage the borrower’s mortgage loan account effectively. These rights are designed to ensure you can handle the mortgage without unnecessary hurdles. Firstly, you have the right to request detailed information about the mortgage, including account balances, payment history, and escrow account details. This transparency is vital for making informed decisions regarding the property.
Additionally, you are entitled to seek loss mitigation options, which can include loan modifications, repayment plans, or forbearance agreements. These options can be crucial in preventing foreclosure and maintaining the property. Importantly, while you have these rights, you are not personally liable for the debt, meaning you can manage the mortgage without the burden of the original borrower’s financial obligations.
⎆ Responsibilities of Successors
While successors in interest are granted significant rights, they also have specific responsibilities to ensure smooth management of the mortgage loan. One of the primary responsibilities is to provide the servicer with adequate documentation to confirm your identity and ownership interest in the property. This can include legal documents such as a death certificate, divorce decree, or other relevant paperwork.
Maintaining open and timely communication with the servicer is also crucial. This involves promptly responding to requests for additional information or documentation and keeping the servicer informed of any changes in your contact information. By fulfilling these responsibilities, you help facilitate a cooperative relationship with the servicer, ensuring that your rights are upheld and that the mortgage is managed effectively.
Servicer Requirements
⎆ Obligations of Servicers
Servicers have a set of defined obligations they must adhere to when dealing with successors in interest. These obligations are in place to ensure that successors can manage the mortgage loan account without facing undue difficulties. One of the primary obligations is to provide a written response acknowledging receipt of an information request from a successor in interest within five business days. This acknowledgment is crucial as it confirms that the servicer has received the request and is processing it.
Furthermore, servicers must provide a substantive response to the information request within 30 days, detailing the requested information or explaining why certain information cannot be provided. If additional documentation is needed to confirm the successor’s status, the servicer must notify the successor promptly, specifying what additional documents are required.
Servicers are also required to comply with the requirements for error resolution. If a successor in interest identifies an error in the mortgage servicing, the servicer must investigate and correct the error within a specified timeframe. This ensures that any mistakes are addressed promptly, preventing potential issues from escalating.
In addition to these obligations, servicers must provide contact information, including a telephone number, for further assistance. This allows successors in interest to easily reach out for additional help or clarification regarding their queries. By adhering to these obligations, servicers help ensure that successors in interest can manage the mortgage loan account effectively and without unnecessary obstacles.
Requests for Information and Error Resolution
⎆ How to Request Information
If you are a successor in interest and need information about the borrower’s mortgage loan account, you have the right to submit a request for information. To do this, you should send a written request to the mortgage servicer, including a telephone number and other relevant contact information. Be sure to specify the details you need, such as account balances, payment history, or escrow account information.
When making a request, it is important to provide sufficient documentation to confirm your identity and ownership interest in the property. This may include a death certificate, divorce decree, or other legal documents. The servicer must respond to your request within a specified timeframe, typically acknowledging receipt within five business days and providing a substantive response within 30 days. If the servicer requires additional documents to confirm your status, they must notify you promptly.
By following these steps, you can ensure that your request for information is valid and that you receive the necessary details to manage the mortgage loan effectively. If you encounter any issues or errors, you have the right to request error resolution, and the servicer must comply with the requirements to address and correct any mistakes.
By integrating these new sections, the article now provides a more comprehensive understanding of the CFPB Successor in Interest Rules, particularly for widows and divorced persons. It offers clear guidance on the definition, importance, legal implications, and practical steps for requesting information and resolving errors, ensuring that readers are well-informed and empowered to manage their mortgage loans effectively.
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Contact us to see what defenses you have or to negotiate with the debt collector. Nick C. Thompson, Bankruptcy Lawyer: 502-625-0905.
