Rep. Lois Capps, D-Santa Barbara, on Wednesday applauded the Consumer Financial Protection Bureau for issuing a rule to protect widows and widowers from losing their homes.
The rule specifically ensures that when a borrower dies, their surviving loved one will not lose the home they shared because of unfair practices companies have employed to prevent surviving spouses from being added to their mortgage.
The rule comes after Capps sent a letter, along with ranking member Maxine Waters of California and Sen. Richard Blumenthal of Connecticut, to eight executive agencies, including the Consumer Financial Protection Bureau, urging them to protect surviving spouses from foreclosure.
The CFPB rule clarification will help surviving family members be added to a mortgage without jumping through unnecessary hoops. This is important because it will give loved ones the opportunity to work with lenders and to be considered for a loan modification, if necessary, which may enable them to keep their home and avoid foreclosure. In the letter, Capps, Blumenthal and Waters provided examples from their respective constituents affected by this problem. The problem was also reported on in the New York Times.
“I am encouraged by today’s announcement from the Consumer Financial Protection Bureau and their continued attention to these issues,” Capps said. “Losing a spouse should not mean losing a home, which is why I wrote a letter urging greater protections for this vulnerable group of surviving spouses. This was a very important clarification to make and it will help ensure that surviving spouses are able to be added to their home’s mortgage, stay in their homes, and avoid foreclosure.”
There are various unique circumstances that can cause surviving spouses to lose their homes to foreclosure. For example, when property legally transfers from family members to their heir with an outstanding loan on the property, there can be significant consequences if an heir is not able to add their name to the mortgage. A surviving spouse may not be able to add their name if, after the death of their spouse, they have fallen behind on the mortgage because lenders usually require payments to be up-to-date in order for a survivor to assume the loan. Moreover, if the survivor cannot afford the required payments and is not on the mortgage, lenders will often refuse to negotiate loan modifications with them, treating them as a stranger instead of a partner of the deceased. This catch-22 often affects women in their later years, who were never listed on mortgage documents with their husbands.
With the rule, it should be easier for the surviving family member to be added to the mortgage as a named borrower, allowing them to more easily obtain account information, pay off the loan, or seek a loan modification. The CFPB rule can also apply to other transfers besides surviving spouses, including transfers to living trusts, transfers during life from parents to children, transfers resulting from divorce or legal separation, and other family-related transfers.
— Chris Meagher is the press secretary for Rep. Lois Capps, D-Santa Barbara.