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How does the spouse who is awarded the marital home yet is not on the current mortgage gain access to information about the current mortgage? This isn’t as easy as you may think!
We all know that often only one spouse is on the current mortgage to the marital home. A mortgage is a legally binding contract, separate from a divorce decree. The original agreement between the lender and consumer cannot be modified by the court.
So what happens when the spouse who is awarded the marital home isn’t on the current mortgage and has no plans to refinance the home immediately into their name? The spouse becomes what’s known as a Successor of Interest.
Successor Homeowner’s Right to Information | Another sticking point for divorcing spouses who are awarded ownership of the marital home and who are not currently obligated on the existing mortgage is the hurdle of obtaining information on the current mortgage.
Two important sets of CFPB amendments to its RESPA and TILA mortgage servicing rules went into effect on April 19, 2018. One set of amendments for the first time extends the broad array of mortgage servicing protections to successors in interest—such as home-owners who inherited a home after the borrower’s death or were awarded the marital home in a divorce. These homeowners now are entitled to protections relating to loan modifications, dispute rights, monthly statements, escrow accounts, servicing transfers, and other rights afforded by TILA and RESPA to home mortgage borrowers.
The new rules expand the definition of a “borrower” for purposes of RESPA, and “consumer” for purposes of TILA, to include a confirmed successor in interest. Successor in interest is defined as coextensive with transfers listed in the Garn-St. Germain Act after which a due-on-sale clause may not be exercised.
This list includes transfers related to the borrower’s death or a divorce or separation agreement, transfers to a spouse or children, or to a trust in which the borrower is a beneficiary. Protections are afforded a successor under RESPA and TILA once a servicer has confirmed the successor’s identity and an ownership interest in the property. No other requirement should be imposed as a condition of “confirming” a successor in interest pursuant to the regulation.
The CFPB created a special limited “Request for Information” applicable to potential successors in the new RESPA § 1024.36(i). If a servicer receives any written request from a person that “indicates” that a person “may be a successor in interest” and that contains the name of the transferor borrower and sufficient information to enable the servicer to identify the loan at issue, the servicer must respond by providing the potential successor in interest with a written description of the documents the servicer reasonably requires to confirm the person’s identity and ownership interest. The servicer must acknowledge receipt within five business days and respond substantively within thirty business days.
Working with an experienced mortgage professional who is well versed in the many ways the divorce affects the mortgage is a huge benefit to both the divorce team as well as the divorcing homeowners. You can't think traditionally when working with divorce and mortgage financing.
Always work with a Certified Divorce Lending Professional (CDLP) when going through a divorce and real estate or mortgage financing is present.
This is for informational purposes only and not for the purpose of providing legal or tax advice. You should contact an attorney or tax professional to obtain legal and tax advice. Interest rates and fees are estimates provided for informational purposes only and are subject to market changes. This is not a commitment to lend. Rates change daily – call for current quotations.
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