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Heirs and mortgage assumption, part 2: modification guidelines

In the first part of this post, we explained why federal regulators have issued rules to help surviving spouses and other heirs who wish to assume a mortgage after the mortgage holder dies.

As we discussed last week, mortgage servicers have often failed to make a good faith effort to work with heirs, including surviving spouses, who seek to keep a mortgage from going into foreclosure. In fact, far from being a help to a deceased homeowners' heirs, the servicers have often been a hindrance.

In this part of the post, let's look in some detail at the guidelines issued by the Consumer Financial Protection Bureau (CFPB) in this area.

Starting in January, the guidelines call for mortgage loan servicers to follow policies that commit the servicers to providing prompt responses to surviving spouses and other successors. The response is supposed to include providing accurate information about necessary documentation for assuming the mortgage.

Loan servicers are also supposed to make timely determinations about the eligibility of successors for loan modification.

Technically, the new requirements the CFPB is calling for are "guidelines," not rules. They are not actually rules in that they do set forth penalties against mortgage servicers who fail to comply.

The CFPB guidelines do make clear, however, that federal regulators are prepared to provide more scrutiny to lenders and loan servicers in order to help heirs take over mortgages.

There is also the possibility of private legal action by widows or other heirs to challenge wrongful foreclosure.

To be sure, heirs need to make strategic decisions about whether it makes sense to take over a mortgage in a given case. After all, even if the house in question has emotional significance, real estate choices have to be put into a bigger estate administration picture.

But the new guidelines on the assumption of mortgages should help give heirs a better chance to frame their choices.

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

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