On August 4, the CFPB issued Final Rules providing foreclosure protections. The Rules, consisting of 901 pages, address foreclosure protections, successors in interest, borrowers in bankruptcy, loss mitigation, servicing transfers, and loss mitigation applications. The Rules consist of a number of amendments to Regulation X and Regulation Z, their respective Official Interpretations, and model forms and clauses. Along with the Final Rules, the CFPB also issued an Interpretive Rule providing safe harbors from liability under the Fair Debt Collection Practices Act that coincide with the Final Rule.
In conjunction with the Rules, the CFPB prepared a Press Release summarizing the changes that credit unions will need to follow. Compliance with the majority of the changes will 12 months after the publication in the Federal Register. Provisions regarding successors in interest and periodic statements for borrowers in bankruptcy will be effective 18 months after publication.
Since the Final Rule encompasses a number of consumer protections, NWCG is breaking them down into multiple blog posts, so you burn out slowly, rather than all at once. Take a look at the CFPB’s Press Release, and then keep checking back here for our detailed evaluation of the new requirements. This post will address providing relief to successors in interest –
Expanding consumer protections to surviving family members and other homeowners: If a borrower dies, existing CFPB rules require that servicers have policies and procedures in place to promptly identify and communicate with family members, heirs, or other parties, known as “successors in interest,” who have a legal interest in the home. Today’s final rule establishes a broad definition of successor in interest that generally includes persons who receive property upon the death of a relative or joint tenant; as a result of a divorce or legal separation; through certain trusts; or from a spouse or parent. The final rule ensures that those confirmed as successors in interest will generally receive the same protections under the CFPB’s mortgage servicing rules as the original borrower.
In short:
Identifying a successor in interest:
When the credit union receives notice of the death of a borrower, or any transfer of property securing a mortgage loan, it must attempt to determine/respond to any potential successors in interest, or when the credit union receives a written request from a person claiming to be a successor in interest, the credit union must respond with a list of documents the credit union reasonably requires in order to confirm the person’s identity and ownership interest in the property.
Confirming a successor in interest:
Once the credit union receives the documents requested, it must determine whether the person is a confirmed successor in interest and notify the person whether: (1) they are a confirmed successor in interest, (2) more documentation is needed to confirm, or (3) the person is determined not to be a successor in interest.
Acknowledgement by the credit union:
The credit union may (optional) provide the confirmed successor in interest with a written notice and acknowledgement form. The notice must include that the successor in interest is not liable on the loan and is entitled to receive certain notices if the person completes the acknowledgement form.
Successor in interest acknowledgement execution:
If the successor in interest signs and returns the acknowledgement form, the credit union can share certain disclosures with the successor in interest regarding the loan. If the successor in interest does not return the acknowledgement form, the credit union is limited on what it can share until either the successor in interest refinances the loan, or returns the completed acknowledgement form.
Subpart C – Mortgage Servicing
1024.30 Scope
(d) Successors in interest. A confirmed successor in interest shall be considered a borrower for purposes of 1024.17 and this part.
1024.31 Definitions
Successor in interest means a person to whom an ownership interest in a property securing a mortgage loan subject to this subpart is transferred from a borrower, provided that the transfer is:
(1) A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
(2) A transfer to a relative resulting from the death of a borrower;
(3) A transfer where the spouse or children of the borrower become an owner of the property;
(4) A transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property; or
(5) A transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.
Confirmed successor in interest means a successor in interest once a servicer has confirmed the successor in interest’s identity and ownership interest in a property that secures a mortgage loan subject to this subpart.
1024.32 General Disclosure Requirements
(c) Successors in interest.
(1) Optional notice with acknowledgment form. Upon confirmation, a servicer may provide a confirmed successor in interest who is not liable on the mortgage loan obligation with a written notice together with a separate acknowledgment form that meets the requirements of paragraph (c)(1)(iv) of this section and that does not require acknowledgment of any items other than those identified in paragraph (c)(1)(iv) of this section.
The written notice must clearly and conspicuously explain that:
(i) The servicer has confirmed the successor in interest’s identity and ownership interest in the property;
(ii) Unless the successor in interest assumes the mortgage loan obligation under State law, the successor in interest is not liable for the mortgage debt and cannot be required to use the successor in interest’s assets to pay the mortgage debt, except that the lender has a security interest in the property and a right to foreclose on the property, when permitted by law and authorized under the mortgage loan contract;
(iii) The successor in interest may be entitled to receive certain notices and communications about the mortgage loan if the servicer is not providing them to another confirmed successor in interest or borrower on the account;
(iv) In order to receive such notices and communications, the successor in interest must execute and provide to the servicer an acknowledgment form that:
(A) Requests receipt of such notices and communications if the servicer is not providing them to another confirmed successor in interest or borrower on the account; and
(B) Indicates that the successor in interest understands that such notices do not make the successor in interest liable for the mortgage debt and that the successor in interest is only liable for the mortgage debt if the successor in interest assumes the mortgage loan obligation under State law; and
(C) Informs the successor in interest that there is no time limit to return the acknowledgment but that the servicer will not begin sending such notices and communications to the confirmed successor in interest until the acknowledgment is returned; and
(v) Whether or not the successor in interest executes the acknowledgment described in paragraph (c)(1)(iv) of this section, the successor in interest is entitled to submit notices of error under § 1024.35, requests for information under § 1024.36, and requests for a payoff statement under § 1026.36 with respect to the mortgage loan account, with a brief explanation of those rights and how to exercise them, including appropriate address information.
(2) Effect of failure to execute acknowledgment. If, upon confirmation, a servicer provides a confirmed successor in interest who is not liable on the mortgage loan obligation with a written notice and acknowledgment form in accordance with paragraph (c)(1) of this section, the servicer is not required to provide to the confirmed successor in interest any written disclosure required by §§ 1024.17, 1024.33, 1024.34, 1024.37, or § 1024.39 or to comply with the live contact requirements in § 1024.39(a) with respect to the confirmed successor in interest until the confirmed successor in interest either assumes the mortgage loan obligation under State law or executes an acknowledgment that complies with paragraph (c)(1)(iv) of this section and provides it to the servicer.
(3) Additional copies of acknowledgment form. If a servicer provides a confirmed successor in interest with a written notice and acknowledgment form in accordance with paragraph (c)(1) of this section, the servicer must make additional copies of the written notice and acknowledgment form available to the confirmed successor in interest upon written or oral request.
(4) Multiple notices unnecessary. Except as required by § 1024.36, a servicer is not required to provide to a confirmed successor in interest any written disclosure required by §§ 1024.17, 1024.33, 1024.34, 1024.37, or § 1024.39(b) if the servicer is providing the same specific disclosure to another borrower on the account. A servicer is also not required to comply with the live contact requirements set forth in § 1024.39(a) with respect to a confirmed successor in interest if the servicer is complying with those requirements with respect to another borrower on the account.
1024.35 Error Resolution Procedures
(e)
(5) Omissions in responses to requests for documentation. In its response to a request for documentation under paragraph (e)(4) of this section, a servicer may omit location and contact information and personal financial information (other than information about the terms, status, and payment history of the mortgage loan) if:
(i) The information pertains to a potential or confirmed successor in interest who is not the requester; or
(ii) The requester is a confirmed successor in interest and the information pertains to any borrower who is not the requester.
1024.36 Requests for Information
(d)
(3) Omissions in responses to requests. In its response to a request for information, a servicer may omit location and contact information and personal financial information (other than information about the terms, status, and payment history of the mortgage loan) if:
(i) The information pertains to a potential or confirmed successor in interest who is not the requester; or
(ii) The requester is a confirmed successor and the information pertains to any borrower who is not the requester.
(i) Potential successors in interest.
(1) With respect to any written request from a person that indicates that the person may be a successor in interest and that includes the name of the transferor borrower from whom the person received an ownership interest and information that enables the servicer to identify the mortgage loan account, a servicer shall respond by providing the potential successor in interest with a written description of the documents the servicer reasonably requires to confirm the person’s identity and ownership interest in the property and contact information, including a telephone number, for further assistance. With respect to the written request, a servicer shall treat the potential successor in interest as a borrower for purposes of the requirements of paragraphs (c) through (g) of this section.
(2) If a written request under paragraph (i)(1) of this section does not provide sufficient information to enable the servicer to identify the documents the servicer reasonably requires to confirm the person’s identity and ownership interest in the property, the servicer may provide a response that includes examples of documents typically accepted to establish identity and ownership interest in a property; indicates that the person may obtain a more individualized description of required documents by providing additional information; specifies what additional information is required to enable the servicer to identify the required documents; and provides contact information, including a telephone number, for further assistance. A servicer’s response under this paragraph must otherwise comply with the requirements of paragraph (i)(1).
Notwithstanding paragraph (f)(1)(i), if a potential successor in interest subsequently provides orally or in writing the required information specified by the servicer pursuant to this paragraph, requirements of paragraph (i)(1) of this section only for requests received at the established address. the servicer must treat the new information, together with the original request, as a new, nonduplicative request under paragraph (i)(1), received as of the date the required information was received, and must respond accordingly.
(3) In responding to a request under paragraph (i)(1) of this section prior to confirmation, the servicer is not required to provide any information other than the information specified in paragraphs (i)(1) and (2). In responding to a written request under paragraph (i)(1) that requests other information, the servicer must indicate that the potential successor in interest may resubmit any request for information once confirmed as a successor in interest.
(4) If a servicer has established an address that a borrower must use to request information pursuant to paragraph (b) of this section, a servicer must comply with the requirements of paragraph (i)(1) of this section only for requests received at the established address.
1024.38 General Servicing Policies, Procedures, and Requirements
(b)
(1)
(vi)
(A) Upon receiving notice of the death of a borrower or of any transfer of the property securing a mortgage loan, promptly facilitate communication with any potential or confirmed successors in interest regarding the property;
(B) Upon receiving notice of the existence of a potential successor in interest, promptly determine the documents the servicer reasonably requires to confirm that person’s identity and ownership interest in the property and promptly provide to the potential successor in interest a description of those documents and how the person may submit a written request under § 1024.36(i) (including the appropriate address); and
(C) Upon the receipt of such documents, promptly make a confirmation determination and promptly notify the person, as applicable, that the servicer has confirmed the person’s status, has determined that additional documents are required (and what those documents are), or has determined that the person is not a successor in interest.
(2)
(vi) Promptly identify and obtain documents or information not in the borrower’s control that the servicer requires to determine which loss mitigation options, if any, to offer the borrower in accordance with the requirements of § 1024.41(c)(4).
1026.2 Definitions and rules of construction
(a)
(11) Consumer means a cardholder or natural person to whom consumer credit is offered or extended. However, for purposes of rescission under §§ 1026.15 and 1026.23, the term also includes a natural person in whose principal dwelling a security interest is or will be retained or acquired, if that person’s ownership interest in the dwelling is or will be subject to the security interest. For purposes of §§ 1026.20(c) through (e), 1026.36(c), 1026.39, and 1026.41, the term includes a confirmed successor in interest.
(27)
(i) Successor in interest means a person to whom an ownership interest in a dwelling securing a closed-end consumer credit transaction is transferred from a consumer, provided that the transfer is:
(A) A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
(B) A transfer to a relative resulting from the death of the consumer;
(C) A transfer where the spouse or children of the consumer become an owner of the property;
(D) A transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the consumer becomes an owner of the property; or
(E) A transfer into an inter vivos trust in which the consumer is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.
(ii) Confirmed successor in interest means a successor in interest once a servicer has confirmed the successor in interest’s identity and ownership interest in the dwelling.
1026.20 Disclosure requirements regarding post-consummation events.
(f) Successor in interest. If, upon confirmation, a servicer provides a confirmed successor in interest who is not liable on the mortgage loan obligation with a written notice and acknowledgment form in accordance with Regulation X, § 1024.32(c)(1), the servicer is not required to provide to the confirmed successor in interest any written disclosure required by paragraphs (c), (d), and (e) of this section unless and until the confirmed successor in interest either assumes the mortgage loan obligation under State law or has provided the servicer an executed acknowledgment in accordance with Regulation X, § 1024.32(c)(1)(iv), that the confirmed successor in interest has not revoked.
1026.39 Mortgage transfer disclosures.
Successor in interest. If, upon confirmation, a servicer provides a confirmed successor in interest who is not liable on the mortgage loan obligation with a written notice and
acknowledgment form in accordance with Regulation X, § 1024.32(c)(1), the servicer is not required to provide to the confirmed successor in interest any written disclosure required by
paragraph (b) of this section unless and until the confirmed successor in interest either assumes the mortgage loan obligation under State law or has provided the servicer an executed
acknowledgment in accordance with Regulation X, § 1024.32(c)(1)(iv), that the confirmed successor in interest has not revoked.
The Final Rule also includes updates to model forms and clauses along with updates to Official Bureau Interpretations, which are not included in these posts. ((If they were, you would have quit reading long ago.) Refer to the Final Rule for these changes.
