AG Healey Urges Adoption of Greater Protections for Homeowners Who Acquire Property Following Divorce or Death

Supports Consumer Financial Protection Bureau’s Amendments to Prevent Unnecessary Foreclosures; Recommends Additional Protections

BOSTON – March 16, 2015 – (RealEstateRama) — To further prevent unnecessary foreclosures, Attorney General Maura Healey’s Office sent a letter supporting the Consumer Financial Protection Bureau’s (CFPB) proposed amendments to its mortgage servicing rules to protect homeowners who acquire property following a divorce or the death of a family member, and also urged CFPB to expand certain protections to others who acquire an interest in property.

The letter  supports the CFPB’s efforts to provide greater protections to widows, divorcees, and other family transferees or successors in order to prevent unnecessary foreclosures and other financial harm to homeowners. The AG’s Office also recommended some changes to the proposed amendments to help further clarify the process and expand the protections to other people who possess an ownership interest in the property.

“The experiences gathered through our HomeCorps program have shown our office that homeowners who experience a divorce or the loss of a spouse, parent or partner are among those most vulnerable to foreclosure,” AG Healey said. “We support the CFPB’s efforts to provide greater protections and mortgage loan access for these individuals, and urge the CFPB to further strengthen its regulations to remove obstacles from mortgage servicers when these vulnerable populations are applying for assistance.”

Current CFPB mortgage servicing rules provide key consumer protections for borrowers and their family successors in all phases of mortgage servicing, including loss mitigation. However, mortgage servicers often interpret the words “borrower” and “successor” as narrowly as possible so that they can refuse to communicate with family members, notwithstanding that they have acquired an ownership interest in the property without repercussions. Mortgage servicers rely on a patchwork of U.S. Treasury HAMP guidelines, Fannie Mae and Freddie Mac servicing guidance, and a small section of the CFPB mortgage servicing rules to avoid dealing with successors in interest in a meaningful way. The proposed amendments make clear that mortgage servicers have an obligation to provide information and communicate with the successor homeowner regarding the servicing of the mortgage loan, including loss mitigation options.

As the only one-on-one government advocacy program in the country addressing loan modification issues, the Attorney General’s HomeCorps program is uniquely qualified to discuss how servicers have failed to treat successors in interest fairly when given the chance to do so voluntarily.

In its letter , the AG’s Office supports the CFPB’s proposed amendments to expand the definition of a “successor in interest” to include all individuals who acquire an ownership interest in a mortgaged property through a family transfer, such as a divorce or legal separation, as well as requiring mortgage servicers to promptly identify and facilitate communication with potential successors. According to the letter, many banks fail to communicate with homeowners even when the loans at issue are owned by Fannie Mae and Freddie Mac, both of which have long required servicers to work with divorcees.

Among other recommendations, AG Healey urges the CFPB to:

• Require servicers to adopt state specific policies as to the sufficiency of the proof necessary to establish ownership interest, instead of imposing the same requirements on all potential successors;
• Require written notification of successor status to avoid miscommunication, misunderstandings and the potential for human error;
• Expand the definition of “borrower” to include individuals who hold an ownership interest in the property through a transfer or conveyance other than a family transfer; and
• Expand protections under the mortgage servicing rules to include all individuals who possess an ownership interest in the property, including properties where more than one person holds title to the property but only one of the owners is a borrower, and including mortgagees such as unmarried partners who purchase property together.

The HomeCorps program, established with funds from the $25 billion National Mortgage Settlement, continues to provide assistance to borrowers across the state with dedicated loan modification specialists and through a series of grants programs. As a result of all these actions, the AG’s Office has recovered more than $700 million in relief for investors and borrowers, helped keep more than 30,000 people in their homes, and returned more than $70 million in taxpayer funds back to the Commonwealth. To date, the HomeCorps hotline has received more than 30,400 calls from distressed borrowers, facilitated more 2,800 permanent modifications for homeowners, and achieved more than $76 million in principal reduction relief.

More information about work done by the AG’s Office during the lending crisis can be found on the AG’s website.

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Jillian Fennimore
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