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Heirs and mortgage loan assumption options, part 1: new rules

This blog is by no means aimed only at people whose estate planning decisions take place on an endless gravy train of high-asset accumulation. To be sure, we often write about wealth transfer in ways that make sure to include the upper end of the income spectrum.

But we also address wills and other nuts-and-bolts decisions that a wide range of people face. And this certainly includes people who are struggling with their mortgages.

In this post, we will discuss new federal guidelines intended to prevent unnecessary foreclosures following the death of a homeowner.

The rules were issued last month by the Consumer Financial Protection Bureau (CFPB).

The CFPB developed and issued the rules after receiving numerous complaints about mortgage loan servicers who failed to cooperate with homeowners' survivors.

Indeed, reports indicated that loan servicers sometimes even refused to talk with family members of the deceased debtor. At other times, servicers reportedly insisted that family members supply nonexistent documents.

There are also reports that loan servicers have sometimes made grieving survivors provide a loved one's death certficate repeatedly in order to get the servicer to acknowledge the death.

The goal of the new rules, then, is to prevent arbitrary foreclosures by making it more feasible for survivors of someone who dies to assume the mortgage.

In some cases, surviving spouses may need a mortgage modification in order to assume the mortgage. This is a signficant issue in many cases, and the CFPB is not the only agency concerned about it. Fannie Mae, the quasi-public mortgage lending giant, is concerned as well. 

In part two of this post, we will discuss the new rules that the CFPB has issued.

Source: The New York Times, "Guidelines Help Heirs Assume and Modify Loans," Lisa Prevost, Nov. 14, 2013

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