a death scenario. And, a person should not be asked to provide an
affidavit of heirship in a state that doesn’t recognize that process.
Given the breadth and scope of the required research, some institutions may have difficulty dealing with all of the potential nuances.
Reliance on outside vendors may be the best solution to obtain
what is needed to fully comply with the Bureau’s expectations.
Managing Confirmed Successors
Finally, once someone is confirmed by a mortgage servicer as a
successor in interest to a borrower, the 2016 Final Rule will require
that the successor be treated as if he or she is a borrower for the
purposes of the mortgage servicing rules. This will mean that the
servicer may have to make live contact attempts if the mortgage
loan obligation becomes delinquent, and may have to send routine
correspondence, such as interest rate change notifications, periodic billing statements, and escrow statements to the successor.
Servicers will also need to be able to manage interactions with a
successor in interest, such as a written request for information,
notice of error, request for a payoff quote, or the submission of a
loss mitigation application.
Not only is it likely to be difficult to confirm an individual as
being a successor in interest, it may be equally difficult to manage interactions with the individual once confirmed as a success
in interest. For example, servicers may have many successors in
interest on an account, and a living borrower with an ownership
interest. As a result of the ownership transfer, an individual who
is not obligated to repay the loan could be entitled to information
regarding the borrower’s debt. It is not hard to imagine situations
where contentious debates could arise among numerous heirs or
ex-spouses over how to handle the property and the underlying
debt. Mortgage servicers may be drawn into those disputes.
Regardless of whether an institution is navigating the confirmation process or interacting with a confirmed successor in interest,
it is clear that detailed and comprehensive training for servicer
employees will be paramount to ensure compliance. Transfers
covered by the 2016 Final Rule, such as transfers into an inter
vivos trust or a non-probate transfer to a relative after someone’s
death, could be scenarios an institution has not previously faced.
Front-line employees will need to be able to discuss these concepts
to some degree in a live environment with individuals who may
be impacted and are looking for direction from the mortgage
servicer. Employees who are generating the reasonable documentation request will need to know how to determine what may be
applicable to a particular scenario, and employees will need to
be able to evaluate documents and information received from
a potential successor. Decisions will need to be made to accept
the documentation and confirm the individual as a successor
in interest, deny the individual’s request, or request additional
information and/or documentation.
Employees with customer contact will need to understand the
nuances between interacting with someone who is a borrower
versus someone who is not liable for the debt but does have an
ownership interest in the property. Compliance with the mortgage
servicing rules will be necessary, but servicers will have to decide
whether a successor in interest should be treated as a borrower
for interactions that are not required by federal law, such as any
correspondence required by state law or routine collection efforts.
The successor in interest framework within the 2016 Final
Rule represents a significant shift in the way servicers will be
required to interact with certain people who acquire ownership
in real property. To comply with the new obligations, mortgage
servicers will likely have to venture into unchartered territory and
gain comfort with concepts that may not have been contemplated
previously. Although some of the requirements do not go into
effect until April 19, 2018, servicers should be preparing now to
implement the requirements by the deadline. Sufficient attention
(sometimes translated as “due diligence”) should be devoted to
ensure that all angles are thought through and challenges are
addressed appropriately. ■
ABOUT THE AUTHOR
JONATHAN KOLODZIEJ, ESQ., is an attorney with Bradley Arant
Boult Cummings LLP. He represents all types of consumer financial service providers in regulatory compliance, examination and
enforcement matters. Through this work, he has assisted bank
and non-bank mortgage servicers, mortgage originators, debt
collectors, depository institutions, credit card issuers, small dollar lenders, reverse mortgage companies, investment firms, and
various industry trade associations. Jonathan’s regulatory compliance practice centers around helping clients ensure that their
operations are in compliance with applicable federal and state
consumer financial laws. In this role, he helps clients assess the
impact of new rules and regulations and adapt to changes in the
regulatory environment. When assessing an entity’s compliance or
beginning the implementation process for a regulatory change, he
leads clients through gap analyses, risk assessments and targeted
reviews. He routinely reviews and provides feedback on policy
and procedure documents, form notices, and training modules.
As necessary, Jonathan also helps clients develop and execute
appropriately tailored remediation plans. He can be reached at
firstname.lastname@example.org or (205) 521-8235.
Instead of broad policies and procedures that
a servicer may have developed to manage
interactions with a successor in interest, the
2016 Final Rule imposes specific procedural
requirements that mortgage servicers will have to
follow to confirm that someone actually qualifies
as a successor in interest under the law.