Fed agency eases rules for inherited homes

WASHINGTON – July 17, 2014 – The Consumer Financial Protection Bureau (CFPB) recently has clarified a rule that could have jeopardized heirs of mortgaged homes.

An interpretive rule issued July 8 says that when a borrower dies, the name of the borrower’s heir generally may be added to the mortgage without triggering the CFPB’s Ability-to-Repay rule. CFPB Director Richard Cordray says the rule “gives heirs an opportunity to work with the lender to pay off the loan or seek a loan modification.”

Consumer Reports’ Consumerist blog explained that the CFPB’s action “would allow surviving family members to acquire the title to the property and take over the mortgage or to be considered for a loan workout.”

The Ability-to-Repay rule, which took effect this past January, is intended to protect consumers from irresponsible mortgage lending by making lenders verify that borrowers have the financial wherewithal to repay their loans.

The interpretive rule, the CFPB said, can also apply to other family-related transfers, including those resulting from divorce and to living trusts.

The CFPB last October required mortgage servicers to have policies and procedures in place to promptly identify and communicate with surviving family members and others with legal interest in these homes.

Sources: “CFPB Clarifies Rule That Could Cause Heirs To Lose Their Homes,” Consumerist.com (July 8, 2014); “CFPB Clarifies Mortgage Lending Rules to Assist Surviving Family Members,” Consumer Financial Protection Bureau (July 8, 2014)