Mortgage servicers create barriers for families in crisis, CFPB says
The Consumer Financial Protection Bureau (CFPB) has flagged serious issues in how mortgage companies handle homeowners transitioning loans after the death of a loved one or a divorce.
These individuals, referred to as "successor homeowners", frequently encounter unnecessary hurdles, delays, and financial pressures at critical moments in their lives.
According to the CFPB, some mortgage servicers pressure surviving spouses or recently divorced homeowners to refinance their loans at higher interest rates, despite federal guidelines allowing them to retain their existing terms.
Homeowners have reported waiting months, or even years, for servicers to process their loan paperwork. In some cases, servicers repeatedly requested the same documents or ignored inquiries altogether.
“Servicers generally blame investor requirements, processing volumes, or ‘systems issues, rather than taking responsibility for their shoddy customer service’,” the Bureau said in the report.
“When someone loses a spouse or goes through a divorce, the last thing they need is their mortgage servicer giving them the runaround or pushing them into an unaffordable loan,” added CFPB director Rohit Chopra. “Mortgage servicers have clear obligations under federal law to help these homeowners.”
Domestic violence survivors also face unique risks, with some servicers continuing to send sensitive mortgage information to abusers or requiring their consent for account changes. This practice, the CFPB noted, puts survivors’ safety at risk and undermines their ability to regain financial independence.
The CFPB’s report also revealed that some servicers deny requests to remove the original borrower from a mortgage, even when the successor homeowner has consistently made payments. These denials force families into unnecessary financial strain and legal battles, the agency noted.
The Department of Veterans Affairs (VA) expressed concern over these practices, particularly regarding VA-backed loans.
“Assumptions are a fundamental feature of a VA-guaranteed loan, and when a Veteran passes away, their qualified surviving spouse should be able to assume the loan without further delay,” said Joshua Jacobs, undersecretary for benefits at the Department of Veterans Affairs. “It’s unacceptable that anyone would target surviving spouses in their time of need. VA has published guidance to remind holders and servicers of assumption guidelines — and we’ve outlined how VA will address any failure to comply with these requirements.”
Read next: VA borrowers twice as likely to secure low down payments – report
The CFPB is calling on investors and mortgage guarantors to address these systemic failures. The agency urged them to review their policies, streamline the loan assumption process, and eliminate unnecessary refinancing requirements. Additionally, the CFPB recommended developing policies to protect the safety and rights of domestic violence survivors.
This report builds on the CFPB’s previous actions to safeguard the rights of successor homeowners. Since 2013, the agency has implemented rules to facilitate communication between servicers and grieving families and expanded protections to include property transfers resulting from death, divorce, or trust arrangements.
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