RESPA Requirements Regarding Home Retention Efforts After Borrower Dies

The Bank asks for guidance relative to policies and procedures for communication with family or any successor interest of a deceased borrower with respect to property securing a mortgage loan.

Summary. Under the new mortgage servicing rules of RESPA, servicers must have policies and procedures reasonably designed to ensure that, upon notification of the death of a borrower, the servicer promptly identifies and facilitates communication with a successor in interest of the deceased borrower with respect to the property securing the deceased borrower’s mortgage loan.

The CFPB has provided examples of such policies and procedures, including providing any party claiming to be a successor in interest with a list of the documents the servicer requires to establish the death of the borrower and the legal interest of the successor in interest, prerequisites for assuming or continuing payment of the mortgage loan, promptly evaluating whether to continue foreclosure proceedings, informing the successor in interest about the consequences of assuming a mortgage loan, and conducting training employees in the legal consequences following the death of a borrower.

 

Analysis. Under the new mortgage loan servicing rules of the Real Estate Settlement and Procedures Act (“RESPA”), a servicer must have policies and procedures reasonably designed to ensure that, upon notification of the death of a borrower, the servicer promptly identifies and facilitates communication with a successor in interest of the deceased borrower regarding the residential property securing the mortgage loan. The “successor in interest” would include family members, heirs, or other parties who have a legal interest in the home.

The Consumer Financial Protection Bureau (“CFPB”) has provided examples of servicer practices that would be considered reasonably designed to achieve the objectives of the successor in interest provision:

 

• Promptly providing to any party claiming to be a successor in interest with a list of the documentation the servicer will need to see in order to establish the death of the borrower and the legal interest of the successor in interest (e.g., death certificate, letters testamentary).
• Upon notification of the death of the borrower, promptly identifying and evaluating any issues the servicer must consider in reviewing the rights and obligations of the successor in interest, including:

 

 

1. Receipt of acceptable proof of the successor in interest’s identity and legal interest in the property;
2. Standing of the mortgage as current or delinquent;
3. Eligibility of the successor in interest to continue making payments on the mortgage loan;
4. Whether a trial modification or other loss mitigation procedure was in place at the time of the borrower’s death;
5. Whether there is a pending or planned foreclosure proceeding;
6. Eligibility of the successor in interest for loss mitigation options;
7. Eligibility of the successor in interest to assume the mortgage loan, with or without a simultaneous loan modification or other loss mitigation option.

 

 

• Promptly providing the successor in interest with information about the above issues, promptly notifying the successor in interest of any documents the servicer requires for the successor in interest to continue making payments and to apply for an assumption or loss mitigation options.
• Providing employees with information and training regarding the effect of laws and investor and other requirements on the servicer’s obligations following the death of a borrower, such as servicing guidelines published by Fannie Mae and Freddie Mac, the Garn-St. Germain Act limitations on due-on-sale clauses, and Federal and state laws regarding the disclosure of the deceased’s personal information.

 

The CFPB recommends that the servicer also consider the following for inclusion in the policies and procedures, as a matter of best practice:

 

• Upon notification of the death of the borrower, promptly evaluating whether to postpone or withdraw any pending or planned foreclosure, in order to provide the successor in interest a reasonable time to establish ownership rights and pursue assumption or loss mitigation procedures, as appropriate.
• Promptly providing the successor in interest with information about the possible consequences of assuming the mortgage loan, such as points or fees or that the loss mitigation procedure is not guaranteed if it is not already in place or arranged to commence with the assumption.

 

 

12 CFR 1024.38(b)(1)(vi); CFPB Bulletin 2013-12.

This entry was posted on Tuesday, May 20th, 2014 at 7:22 pm.