<em>The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.
How many times have you heard about a family losing property due to the sickness and death of a love one? Banks are notorious for disregarding the legal interest of relatives – heirs and other
entities with title interest. What brought this to my attention is the fact that anyone living with a spouse or relative or partner owns the risk of being evicted by the lender upon the death of the borrower if their name(s) is not on the mortgage note.
In many mortgage agreements the rights of assumption is buried with the borrower, upon his death.
Lenders typically want to short sale the property and not pursue loan mitigation efforts with relatives or heirs as it becomes a vetting process -credit reports -income verification and background checks are time consuming. More important to the lender is the ability to write off all unpaid principle and interest payments and unmodified expenses-which can be carried over to a few tax years. The new rules agreed to by the CFPB appear to be a game changer and I know of at least 1 case in a NJ court that will be determined under these new guidelines.
Home retention efforts after a borrower dies: In cases in which a borrower dies, the rules the CFPB issued in January require servicers to have policies and procedures in place to ensure that they promptly identify and communicate with family members, heirs, or other parties who have a legal interest in the home. Today’s bulletin provides examples of such servicer policies and procedures, including allowing for continued payment on the mortgage as well as evaluating the heir (or whomever the legal interest in the home passes to) for assumption of the mortgage and, if appropriate, for loss mitigation measures.
This all sounds good and I will keep an eye on the New Jersey test case as it unfolds in the