Do Successor in Interest Rules Apply to My Bank
Do Successor in Interest Rules Apply to My Bank?
Successor in interest rules take effect on April 19, 2018 and many are still wondering if and how they apply to them if they are not a “large servicer.” A “small servicer” is one who services 5,000 or fewer consumer mortgages which they or an affiliate originated. There is no general exemption for small servicers! Successor in Interest Rules apply.
Then, what do I need to know?
If a person receives an ownership interest from a borrower by any one of the following types of transfers, you will need to have standards as to how to confirm that a person who represents themselves as a successor in interest will be identified:
- A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety.
- A transfer to a relative resulting from the death of a borrower.
- A transfer where the spouse or children of the borrower become an owner of the property.
- A transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property.
- A transfer into an inter vivos (living) trust (not a testamentary trust association with death) in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.
The CFPB has provided a Small Servicers Guide to aid in understanding applicability, but you will also want to refer to the Small Entity Compliance Guide as well.
Some basic steps include:
- Facilitating communication with any potential or confirmed successor in interest or their agent (ex: attorney) for the property.
- Identifying the documents you will accept to identify a legitimate successor in interest (or their agent) including personal identification and property interest.
- Providing a potential successor in interest with the documents you require and how to submit a written request for information.
- Developing your internal process for confirming or denying successor in interest status.
- Notifying the person that you either confirm their status, request additional documents, or deny their status. There are timing requirements!
- Once confirmed, you need to treat the party (or their agent) as a borrower for RESPA servicing purposes and as a consumer for TILA servicing rules. All required notices associated with the loan should then be sent to the confirmed successor.
What you don’t need to do is search for successors in interest if you’ve not received actual notice of their existence. Nor can you require a confirmed successor in interest to assume the mortgage obligation. You can renegotiate the terms in the successors name (if they are willing) but then they become the borrower.
Small servicers are not required to write policy and procedures, but it would be a best practice to document your control environment for compliance purposes.
There you have it in a nutshell! All servicers – large and small – must comply.
For additional information contact the author Evelyn Dehmey at edehmey@fosaudit.com.