• Guidance for Mortgage Servicers on Successors in Interest - Financial Institutions Advisory
  • October 31, 2013
  • Law Firm: Howard Howard Attorneys PLLC - Royal Oak Office
  • On October 15, 2013, the Consumer Financial Protection Bureau (CFPB) issued Bulletin 2013-12 providing guidance related to its mortgage servicing rules which are set to become effective on January 10, 2014. Specifically, the guidance requires mortgage servicers (defined broadly as the entity responsible for the servicing of a mortgage loan, including financial institutions that do not meet the small mortgage servicer exemption) to adopt detailed policies and procedures designed to ensure that, upon notification of the death of a borrower, the servicer promptly identifies and facilitates communication with a successor in interest.

    To comply with the CFPB's expectations, mortgage servicers should adopt policies and procedures that include the following practices: 

    • Promptly providing to any party claiming to be a successor in interest a list of all documents or other evidence the servicer requires to establish (1) the death of the borrower and (2) the identity and legal interest of the successor in interest.
    • Upon notification of the death of a borrower, promptly identifying and evaluating any issues the servicer must consider in reviewing the rights of the successors in interest (e.g., proof of the successor in interest's identity and legal interest in the property; status of the mortgage loan; existing or future loss mitigation efforts) and providing successors in interest with information about any such issues.
    • Promptly providing successors in interest with any documents, forms or other materials the servicer requires for the successor in interest to continue making payments and to apply to be evaluated for an assumption and, where appropriate, loss mitigation options.
    • Promptly evaluating documents, forms and other materials received from the successor in interest.
    • Providing employees with information and training on the servicer's obligations following the death of a borrower including, but not limited to, servicing guidelines published by Fannie Mae and Freddie Mac.

    Mortgage servicers should also determine - upon notification of the death of a borrower - whether to postpone or withdraw any pending or planned foreclosure proceeding in order to provide a successor in interest a reasonable time to establish ownership rights and evaluate assumption and loss mitigation options. Information should also be provided to the successor in interest about the possible consequences of assuming the mortgage loan.