Half a loaf is what you too often got when you weren’t the original borrower on a home loan. No mortgage servicing rights under Federal law came title to the property.
Whether you inherited the property or it was awarded to you in a divorce, you get shortchanged by the mortgage lender.
Even with a court order from a divorce or a deed from the probate court making you the owner of the property, too often the bank holding the mortgage loan didn’t accord you the full set of rights they had to give the original borrower.
While the law says you own the property, the mortgage lender says “so what?”
But that has changed.
Starting in April, 2018, CFPB amendments to RESPA and TILA rules extend mortgage servicing protections to successors in interest in real estate. Those who inherit property, or are awarded a home in divorce, now have the same federal rights with respect to the home loan as the original borrower.
Now, if you are a successor in interest on a home, you are now entitled to make a Request for Information about the loan; dispute the lender’s accounting; and participate in loan modifications, just as if you’d been the original borrower.
Who are successors?
In a stroke of efficiency, the new CFPB rules adopted the list of protected successors from 20 year old federal law.
The Garn-St.Germain Act created a list of transfers of real property that are excepted from enforcement of a contractual “due on sale” clause. Transfers that don’t fall in the list of exceptions can trigger a foreclosure since the note is now due in full.
The protected transfers include
- a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
- a transfer to a relative resulting from the death of a borrower;
- a transfer where the spouse or children of the borrower become an owner of the property;
- 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;
Getting confirmed as a successor
Under the new rule, the definition of a “borrower” is expanded to include a confirmed successor in interest.
When a successor makes a written request of a mortgage servicer that indicates that the person making the request may be a successor, and provides enough information to allow the servicer to identify the original borrower and the loan in question, the servicer has duties to the requestor.
Within specified time frames, the servicer must indicate what documents are needed to confirm that the person making the request is a protected successor. The document request must reasonable under the laws of the jurisdiction, the situation of the successor, and the documents already in the servicer’s possession.
Borrowers have rights
As a confirmed successor in interest, all of the RESPA and TILA protections are available to you.
It does not matter for these purposes that you aren’t liable on the underlying loan. Your property is liable, and thus you can invoke your rights to get information, challenge errors, have payments properly credited, and be considered for loss mitigation.
New rules/better information for borrowers in bankruptcy
More about the new Request for Information
California’s better way to pass real estate at death