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

CFPB says divorced, widowed clients may be pushed into unaffordable home loans
Report finds that mortgage servicers may pile on pressure during vulnerability.
DEC 18, 2024

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.  

Latest News

JPMorgan tells fintech firms to start paying for customer data
JPMorgan tells fintech firms to start paying for customer data

The move to charge data aggregators fees totaling hundreds of millions of dollars threatens to upend business models across the industry.

FINRA snapshot shows concentration in largest firms, coastal states
FINRA snapshot shows concentration in largest firms, coastal states

The latest snapshot report reveals large firms overwhelmingly account for branches and registrants as trend of net exits from FINRA continues.

Why advisors to divorcing couples shouldn't bet on who'll stay
Why advisors to divorcing couples shouldn't bet on who'll stay

Siding with the primary contact in a marriage might make sense at first, but having both parties' interests at heart could open a better way forward.

SEC spanks closed Osaic RIA for conflicts, over-charging clients on alternatives
SEC spanks closed Osaic RIA for conflicts, over-charging clients on alternatives

With more than $13 billion in assets, American Portfolios Advisors closed last October.

William Blair taps former Raymond James executive to lead investment management business
William Blair taps former Raymond James executive to lead investment management business

Robert D. Kendall brings decades of experience, including roles at DWS Americas and a former investment unit within Morgan Stanley, as he steps into a global leadership position.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.