July 08, 2014

CFPB alters mortgage rules for heirs

July 9, 2014 – CFPB announced an interpretive rule to clarify its mortgage requirements in the case of a borrower dying, in order to help heirs to inherit property and take over mortgages without triggering the ability-to-repay rule.

CFPB Director Richard Cordray said, "Losing a loved one should not mean also losing your home. Today's interpretive rule makes it clear that when family members inherit property, they can take over the mortgage without jumping through unnecessary hoops. This gives heirs an opportunity to work with the lender to pay off the loan or seek a loan modification."

The ability-to-repay mortgage rule, along with other mortgage rules that became effective in January, requires lenders to make a "good-faith determination" that borrowers will be able to repay their loans. The interpretive rule will allow an heir who has already acquired the title to the home to be added to the mortgage without triggering ability-to-repay requirements. It is effective July 11.

Last October, CFPB clarified that mortgage servicers must have policies in place for identifying family members and heirs in the event of a borrower dying.