CFPB Successor in Interest Rules for Widows, Divorced Persons and Heirs
The Consumer Financial Protection Bureau Successor in Interest Rules took effect on April 19th, 2018. What the successor in interest rules say boils down to some pretty simple requirements under the applicable law.
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 for policies and procedures except that they are not personally liable for the debt. If you are a confirmed successor in interest, here is the successor in interest rule.
Under a rule for a qualified written request, you can ask for mortgage loan account information, request a payoff statement, A successor in interest will conduct business generally similar to the loan’s original maker for the mortgage loan. A successor in interest also has the same rights to loss mitigation.
TILA (truth in lending act) and RESPA (real estate settlement procedures act) compliance
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 enable the servicer to deal with widows and divorced parties without violating the FDCPA. It protects surviving spouses who acquire property rights. It prevents foreclosure when the servicer of the mortgage could not otherwise communicate and deal with the new owner.
The heir, widow, or divorced individual essentially stands in the shoes of the “transferor borrower,” who has the rights to make payments, obtain a mortgage modification, or obtain information. Many of these rights are fount in the mortgage servicing rules. If you are an heir or you obtained the property through a divorce you are a potential successor in interest. The official interpretation of this is in the CFPB rules and primarily in the real estate settlement procedures act.
The lender must promptly determine the person’s identity after you give actual notice which requires documentation such as a death certificate or marriage settlement agreement. You then become a confirmed successor in interest.
Successor in Interest Rules for Widows & Divorced Persons
Successor in interest rules cover transfers to family.
Anyone who collects or services the mortgage debt 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 differently than the original borrower once the interest and identity are confirmed.
The successor in interest rules covers a joint tenant, a relative of the borrower, spouse, or child of the borrower. Successor in interest covers these persons whether the transfer was due to death or due to divorce, as long as they have an ownership interest in the property. Any legal separation agreement, dissolution, or incidental property settlement agreement will trigger the successor in interest rule. The Successor in interest rule is helpful for persons who otherwise might lose a home simply because the lender will not treat them as the borrower. And the successor in interest rule is especially helpful in Chapter 13.
Other parties including a potential successor in interest
Heirs, executors, administrators, or assignees may also be covered under the successor in interest rule. However, these parties must provide a written request to continue as a borrower along with evidence of their ownership interest in the property.
Once the borrower’s identity and interest have been confirmed, they will have the right to assume responsibility for the mortgage loan. This means they can become responsible for making timely payments and complying with all terms of the loan agreement. In addition, they have access to information about the loan and can make any necessary changes or modifications.
For joint tenants, this means that if one tenant passes away or transfers their ownership interest, the other tenant has the right to assume responsibility for the mortgage loan without having to go through a lengthy process This rule covers mortgage loans even for potential successors in interest.
Scope of a confirmed successors borrower’s mortgage loan account information
The successor in interest rules and procedures require servicers to confirm and communicate with any potential or confirmed successor in interest:
- Upon notice of death or transfer. You should promptly provide a death certificate or divorce property settlement.
- Including periodic statements on the mortgage loan account
- Provide written requests for documentation to persons for supporting documents that are reasonably required to support a request about the property securing mortgage loans.
- 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. There is also a 30-day rule under the same section for other communications.
- 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’s identity and ownership interest.
- The CFPB outlines the Server’s responsibilities to successors in interest under mortgage servicing rules.
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 related to the mortgage loan?
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, and how does this affect their mortgage loan account?
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, as outlined in the mortgage loan contract. 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.
The server must share some information with a confirmed successor in interest but not everything.
The lender does not have to share personal information about the original borrower’s contact or financial information, but they must provide details about the mortgage loan obligation. But the lender does have to provide the following information about the mortgage loan subject:
- Escrow accounts, payments, and account balances;
- Mortgage servicing transfers and mortgage transfers;
- Error resolution;
- Information requests;
- Force-placed insurance;
- Early intervention;
- Loss mitigation;
- Post-consummation events;
- Payoff statements; and
- Periodic Statements.
This information is crucial for understanding the property securing the mortgage loan and the obligations tied to it.
Resources for Bankruptcy
Louisville Kentucky Bankruptcy Forms These resources can help you understand your rights and obligations as a transferor borrower.
Credit Counseling to Meet Bankruptcy Requirements It is important to provide a written notice to the servicer to inform them of your status as a successor in interest.
Including Income, Assets, Debts, and Expenses in a Bankruptcy Petition You may need to submit a written request to obtain necessary documents and confirm your identity and ownership interest.
Fraudulent or Preferential Transfers • Fair Market Value Servicers are required to promptly facilitate communication with potential or confirmed successors in interest to ensure compliance with regulatory requirements.
Fraudulent Concealment and Transfers in Bankruptcy
Contact us to see what defenses you have or to negotiate with the debt collector. Nick C. Thompson, Bankruptcy Lawyer: 502-625-0905.
