Mortgage Loan Training

From 10 January 2014, a mortgage provider must have in place guidelines and mechanisms enabling it to promptly and easily communicate with the interested replacement upon learning of the decease of a creditor. CFPB will define "successor in interest" as the marriage partner, infant or beneficiary of a late debtor or other person with an interest in the real estate.

It is the declared aim of the Directive to encourage, where possible, the commitment of descendants who are confronted with the destruction of their houses by the demise of a debtor. These guidelines point out that one of the elements of these policy should be a procedure to promptly provide each of the parties purporting to be assigns with a document listing all the documentation required by the service provider to determine the mortality of the debtor and the legitimate interests of the assignee.

These documents can contain a deed, an enforceable will or a judicial decision on the inheritance of properties. In addition, the service provider should immediately after receiving notice of the borrower's decease immediately seek to detect any problems that the service provider might have in verifying the respective successor's legal and contractual position.

Examples may be obtaining reasonable evidence of the assignee's identities and ownership interests, the mortgage loan's status as actual or past due, the assignee's right to further payment of the mortgage loan, a forced sale proceeding in progress or contemplated, and the assignee's right to receive interest for tax relief option and other terms.

In the interests of the succession, the regulations also stipulate that service providers must make information available to their succession providers on all the succession conditions in the interests of the succession provider in order to resume mortgage loan repayment, take over the mortgage loan and obtain qualification for harm reduction option. Providers should make available any document, form or other material required to enable the assignee to make continued financial contributions in the interest of the assignee and to request the mortgage to be assumed.

Furthermore, upon receiving the necessary documents, the service provider must immediately assess the replacement in the interest of the above mentioned alternatives. Under the Directive, service providers are also obliged to inform and train staff dealing with mortgage lending about the effects of the law and the service provider's responsibilities after the mortality of a debtor.

The Service Provider is advised to make available to employee servicers policies such as those set forth by Fannie Mae and Freddie Mac, the Yarn-St. Germain Act of 1982, which imposes certain restrictions on the use of maturity dates in the transfer of immovable assets due to the Mortgagor's demise, and both federal and state statutes that restrict the release of the Mortgagor's non-public personally identifiable information.

Lastly, the guide provides that the service provider should check best practice in relation to its guidelines after being informed of the decease of a debtor. This may also involve an immediate examination of whether a forced sale procedure, whether in progress or scheduled, should be postponed or withdrawn in order to allow the interested buyer a suitable period of grace to substantiate property claims and to prosecute the takeover of the loan.

In addition, the service provider should quickly make available to the interested follower information on the implications, if any, of taking over the mortgage loan, together with the cost. It should also be pointed out to the interested successors that a later possibility of reducing the losses is not ensured if the interested successors take over the loan without an existing or at the same time with the takeover beginning possibility of reducing the losses.

Clearly, CFPB requires mortgage providers to take a more pro-active stance in their dealings with successor banks that are interested in the case of the mortgage borrower's deaths. As the 10 January 2014 cut-off date is imminent, those servicing mortgage lending must act swiftly to establish appropriate guidelines and practices that take into account the above mentioned needs and adequately educate staff on these needs.