How does the spouse who is awarded the marital home yet is not on the current mortgage gain access to current mortgage information after divorce? This isn’t as easy as you may think!
A Successor of Interest
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 Mortgage Information After Divorce
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 homeowners 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.
Understanding the New Rules
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.
How Can a CDLP Help
A CDLP™ brings tremendous value to the divorce team during the settlement process because of their stronger perspective of the entire divorce process. Their understanding of the intersection of family law, tax law, real estate, and mortgage financing truly separates them from other mortgage professionals in the industry.
A successful divorce settlement is a result of putting the pieces of the puzzle together in such a manner that both divorcing spouses come out of the divorce whole. Each member of the professional divorce team should bring value and perspective that benefits the overall outcome and success.
Working with a Certified Divorce Lending Professional (CDLP®) and incorporating Divorce Mortgage Planning into the divorce settlement may help both spouses obtain new mortgage financing post-divorce.
Contact a CDLP® today for a copy of the Divorcing your Mortgage Homeowner Workbook, a guide to credit, real estate, and mortgage financing after divorce. This workbook will help you get organized, be prepared, and understand your mortgage financing position whether you are needing to refinance the marital home in an Equity Buyout situation or prepare to sell and purchase a new home post-divorce.
As a divorce mortgage planner, the CDLP® can help divorcing homeowners make a more informed decision regarding their home equity solutions while helping the professional divorce team identify any potential conflicts between the divorce settlement, home equity solutions as well as real property issues.
What is Divorce Mortgage Planning
Divorce Mortgage Planning is a holistic approach to the process of evaluating mortgage options in the context of the overall financial objectives as they relate to divorcing situations. Working directly with the divorce team, a CDLP™ understands the intersection of divorce, tax, real estate, and mortgage financing. The role of the CDLP® is to help integrate the mortgage selected into the overall long and short-term financial and investment goals, to help minimize taxes, to minimize interest expense, and maximize cash flow.
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. The information contained in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education purposes.
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