CFPB says divorced, widowed clients may be pushed into unaffordable home loans

When a client is going through a divorce or grieving following the death of their spouse, the last thing they need is to be unfairly treated by their home loan servicer.

But a new report from the Consumer Financial Protection Bureau says firms may pressure homeowners into unaffordable loans when they are at their most vulnerable and may also act unreasonably in other ways.

The bureau’s research has discovered that when dealing with a mortgage company, “many” people are being pushed into new loans at higher rates than their existing mortgage following the death of, or divorce from, an original borrower.

Additionally, servicers may repeatedly request the same documents time and again over several months or years, often delaying the arrangement of loans and adding to the emotional and financial burden of those who are grieving.

“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,” said CFPB Director Rohit Chopra. “Mortgage servicers have clear obligations under federal law to help these homeowners.”

The CFPB report also found that domestic abuse victims are sometimes put at risk by firms who send mortgage information to the abuser.

Servicers often blame investor requirements, processing volumes, or “systems issues,” rather than taking responsibility for their shoddy customer service, the bureau says.

VETERANS MORTGAGES

Among those who are facing challenging dealings with their mortgage servicer are spouses of military veterans who have died. But this should not happen with a VA mortgage, according to Joshua Jacobs, Under Secretary for Benefits at the Department of Veterans Affairs.

“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,” he said. “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.”

CFPB says that all homeowners who are left with the responsibility of a mortgage following death or divorce should work with their servicer who are required to help them understand the existing arrangement including how to make loan modifications.