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Tuesday, July 8, 2014

CFPB Clarifies Mortgage Lending Rules for Heirs

The CFPB is issuing an interpretive rule to clarify that when a borrower dies, the name of the borrower’s heir generally may be added to the mortgage without triggering the Ability-to-Repay rule. The clarification is meant to help surviving family members who acquire title to a property to take over the inherited mortgage, and to be considered for a loan workout, if necessary, to keep their home. The CFPB clarified:

Today’s interpretive rule explains that because an heir has already acquired the title to the home, adding the heir as a borrower on the mortgage does not trigger the Ability-to-Repay requirements. The rule does not require the creditor to determine the heir’s ability to repay the mortgage before formally recognizing the heir as the borrower.

The interpretive rule can also apply to transfers to living trusts, transfers during life from parents to children, transfers resulting from divorce or legal separation, and other family related transfers.

Read more.
Read the interpretive rule.

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