On December 17, the CFPB released an Issue Spotlight reporting on challenges that homeowners often face with mortgage servicing companies after a divorce or the death of a loved one which may cause them to become homeowners. The report detailed consumer complaints that mortgage servicers often pressure successor homeowners to refinance at higher interest rates, rather than provide the new homeowner options for managing the existing mortgage. The CFPB also asserted that servicers delay borrower requests frequently to process assumptions of mortgages, sometimes for months or years, leading to some borrowers facing legal issues, missing out on lower cost refinance opportunities, or becoming delinquent on the mortgage.
Similarly, the report alleged that some servicers have refused to release the original borrower from liability, even when the successor homeowner can pay the loan. Additionally, the report highlighted specific risks to domestic violence survivors who assume a mortgage loan after divorce, noting that domestic violence survivors face risks to both their safety and their home when servicers send account information to their abusers and require the abuser’s consent for account changes.
The CFPB urged investors and servicers to protect successor homeowners by ensuring compliance with applicable laws, avoiding unnecessary refinancing, examining underwriting requirements, and developing policies to assist domestic violence survivors. The CFPB noted specifically that investors of mortgages can play a critical oversight role regarding these issues, ensuring that servicers comply with applicable laws and guidances by evaluating their own policies to ensure that successor homeowners are protected from negative consequences when assuming a mortgage loan. The CFPB also noted that its rules require servicers to have policies to verify promptly the legal status of successor homeowners and that federal mortgage program guidelines also provide additional protections for successor homeowners.
