On April 19, 2018, the CFPB’s Successor in Interest Rules take effect. Here’s what you need to know:
The Rules are really modifications to the Mortgage Servicing Rules which are already in place and enable mortgage servicers to communicate with potential and confirmed successors in interest without violating the Fair Debt Collections Practices Act.
The Rules were added to provide additional consumer protections to surviving family members and others who have an interest in a dwelling subject to a mortgage
There is no general exemption for small servicers but small servicers do have the same exemptions with respect to confirmed successors in interest that they have regarding other borrowers and consumers.
Most commonly, a successor in interest is a person who has an ownership interest in property securing a mortgage loan, when that ownership interest was transferred:
Unless an exemption applies, you are required to maintain policies and procedures reasonably designed to:
In some instances, yes. For example, if you receive a written request for information pursuant to 12 CFR 1024.36, there are time limits which must be complied with.
Generally, confirmed successors in interest are treated the same as the original borrower for the purposes of the Mortgage Servicing Rules and as a “consumer” for the purposes of the Truth in Lending Act. This means any confirmed successor in interest is entitled to submit notices of error, requests for information, and requests for a payoff statement with respect to the mortgage loan account.
After confirming that a person is a successor in interest, a servicer may, but is not required, to provide a written notice to that person. If provided, the written notice must include certain details, including an acknowledgement that the servicer has confirmed the person’s identity as a successor in interest, and a notice that the successor in interest is not liable for the mortgage debt and cannot be required to pay off the mortgage, except that the lender has a security interest in the property and the right to foreclose on the property, when permitted by law and authorized under the mortgage loan contract.
Regardless of whether a successor in interest assumed the mortgage loan obligation, a servicer must review and evaluate a loss mitigation application if it is complete and is received from a confirmed successor in interest.
You must send successors in interest disclosures and other information concerning:
Contact information and personal financial information should never be shared with other parties.
A successor in interest is someone who receives real estate property through a will or a transfer from a relative or immediate family member such as a child or spouse. This also includes transfers that occur from legal separation agreements, dissolutions of marriage, or an incidental property settlement agreement.
The loan servicer may request documents within reason, to confirm the person’s identity and ownership interest in the property. The type of documentation needed will depend on how the property has been transferred to the person. The documentation needed also will depend on the servicer and local laws. The servicer may ask for:
• A copy of the deed transferring the title to you
• Copy of birth certificate or marriage license or divorce decree
• Copy of the will or affidavit
• A court order showing that you are the heir
• Trust agreement signed by a trustee
For more information about the Mortgage Servicing Rules, please contact Jeff Rogers and Caren Enloe.
About the authors
Caren Enloe leads Smith Debnam’s consumer financial services litigation and compliance group. In her practice, she defends consumer financial service providers and members of the collection industry in state and federal court, as well as in regulatory matters involving a variety of consumer protection laws. Caren also advises fintech companies, law firms, and collection agencies regarding an array of consumer finance issues. Caren was named one of the “20 Most Powerful Women in Collections” by Collection Advisor in 2018. An active writer and speaker, Caren currently serves as chair of the Debt Collection Practices and Bankruptcy subcommittee for the American Bar Association’s Consumer Financial Services Committee.
Jeff Rogers is a partner in the firm and heads the firm’s Foreclosure and Collateral Recovery Section. He concentrates his practice in the area of creditor representation, including collections, commercial litigation, real property litigation, foreclosure, collateral recovery, bankruptcy, and creditor defense. His clients include banks, credit unions, commercial lenders, finance companies, and businesses of all sizes.
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