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Successor In Interest and Loan Assumption

A successor in interest is defined as a person to whom an ownership interest in the property securing a mortgage loan is transferred from a prior borrower:

  • by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
  • to a relative as the result of the death of a borrower;
  • where the spouse or children of the borrower become an owner of the property;
  • as the result of decree of dissolution by marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property; or
  • by a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of occupancy rights in the property.

A Confirmed Successor in Interest is a successor in interest whose identity and ownership interest in the property securing the mortgage loan has been confirmed by Community Loan Servicing through review and approval of submitted documentation. Community Loan Servicing does not require a person to assume a mortgage loan to be considered a confirmed successor in interest.

A “Potential Successor in Interest” is an unconfirmed successor in interest in which their interest or ownership in the property has not been confirmed, and may be pending documentation submission and review. Community Loan Servicing responds to verbal or written requests from a potential successor in interest. For example, we may be notified of the existence of a potential successor in interest when:

  • we receive notice that a transfer of ownership or of an ownership interest in the property has taken place;
  • we receive notice that a borrower has been divorced, has been legally separated, or has died; or
  • a person other than a borrower requests or submits a loss mitigation application.


PLEASE NOTE: Depending of the scenario, Community Loan Servicing requires submission of specific documentation to confirm the successor in interest (see chart below for more detail on required documentation).

Community Loan Servicing ensures that the documents it requires to confirm a potential successor in interest’s identity and ownership interest are reasonable in light of the laws of the relevant jurisdiction, the specific situation of the potential successor in interest, and the documents already in Community Loan Servicing’s possession. Additionally, Community Loan Servicing may require a potential successor in interest to provide any documents that we reasonably believe are necessary to prevent fraud.

If... Then...
BORROWER IS DECEASED: It is first necessary to verify the death of the borrower. Verification of a borrower’s death is preferably established by:

  • A copy of the borrower’s death certificate but, if not available, it can be provisionally established by:

    1. A copy of a court order establishing death,
    2. A newspaper notice, obituary, or other similar means


NOTE: The rights of an authorized third party via a power of attorney (POA) are terminated upon the death of the customer that signed the power of attorney as per the provisions in the Uniform Power of Attorney Act. Additional proof of representative authority must be provided post death to be able to maintain authorized third party status on the loan account.

Property interest is titled in a borrower's name that is or will be subject to probate or other court proceedings (whether or  not there is a will):
  • Order of distribution (or equivalent documentation)
  • A copy of the Will (if applicable)
  • Proof of identity of the claiming successor in interest
  • Order/Letter of Testamentary or Administration; Deed of Distribution, Order determining Homestead; Affidavit of Change of Title; Judgment of Possession/Partition; recorded Transfer on Death;
  • Order appointing an Administrator/Personal Representative of the Estate
  • If intestate (no Will), need affidavit or order of succession/survivorship.
The property is titled in a borrower’s sole name, or as tenants in common with the applicant claiming successor in interest or another:
  • Court order determining succession or declaring no administration necessary (if available); and
  • Copy of the borrower’s Will, if any; and
  • Copy of the community property agreement, if any
  • Proof of identity of the claiming successor in interest;
  • Copy of the vesting deed (if transfer is automatic per state law).
The property is titled in the borrower’s name along with the claiming successor in interest as joint tenants with rights of survivorship, tenants by the entirety, transfer on death or another designation transferring property to the surviving joint tenant by operation of law at the borrower’s death:
  • Copy of the most recently recorded deed reflecting the joint designation; Affidavit of Survivorship; and
  • Proof of identity of the joint tenant or designated successor as successor in interest; and
  • Proof of continuous marriage between the two spouses (only if titled as tenants by the entirety) through the date of death.


Note: Please refer to the legal requirements for transfer of ownership upon death per the applicable laws in the state in which the property is located. Some state’s law allow for the automatic transfer of title upon death based on the manner in which the property is vested.  

The following are types of Proof of Identity Community Loan Servicing requires of the claiming successors in interest:
  • Copies of government-issued identification (driver’s licenses, passports),
  • Copies of social security cards,
  • Birth certificates,
  • Voter’s registrations
If there is a Personal Representative, Administrator, Executor(ix); legally appointed to represent the borrower’s estate:
  • Proof of identity and a certified copy of the order of the court appointing the legal representative (i.e. letters testamentary, letters of administration, etc.).


Note: Once confirmed via submission to Community Loan Servicing of the above-referenced documents, this party will have the authority to discuss details on the loan account as an authorized third party, make payments, etc. This party will not have the authority to assume the loan or, per Investor guidelines, take advantage of all Loss Mitigation options unless confirmed as the successor in interest.

DIVORCE:

IF the claiming successor in interest acquired an ownership interest from the borrower in the subject property through a court ordered property agreement or settlement order subject to divorce proceedings:

  • Copy of the court ordered settlement agreement or settlement order;
  • Copy of the most recently recorded quitclaim deed, warranty deed, deed of gift, or other applicable transfer instrument reflecting the transfer of interest; and
  • Proof of identity of the claiming successor in interest.
INTER VIVOS TRUST AGREEMENTS:

IF the property is titled in the name of a inter vivos trust created by or for the benefit of the borrower, whereby the borrower is and remains a beneficiary and which does not relate to a transfer of occupancy rights in the property:

Provide copies of the following documents to Community Loan Servicing:

  • Trust certification (confirming identity of trustee, date of trust, current existence of trust; Tax ID number, ), Trustee's Affidavit, Acts of Partition, Certificate of Trust; and
  • Copy of the Trust Instrument executed by Owner identifying property as held in trust and the listed beneficiaries (one of which MUST be the originating borrower(s)).


Proof of identity of the claiming successor in interest (as the beneficiary of the trust). In order to confirm successors in interest, Community Loan Servicing will need two of the items listed below from each beneficiary:

  • Copies of government-issued identification (driver’s licenses, passports), copies of social security card, birth certificates, or voter’s


Note: If property is titled in an inter vivos trust, the trustee(s) of the trust is/are the legal representative(s) of the trust and the beneficiaries of the trust are the successors in interest

INTRA-FAMILY TRANSFER: (transfer to a spouse or close family member (child, parent, etc.) while borrower is alive).

IF the claiming successor in interest acquired an ownership interest in the subject property via  quitclaim deed or gift from a living spouse or parent who  is the borrower of the mortgage loan (Intra-family transfer):

  • Copy of the most recently recorded quitclaim deed, warranty deed, deed of gift, or other applicable transfer instrument reflecting the transfer of interest; and
  • Proof of identity of the claiming successor in interest.

 

Once an individual has been confirmed as a successor in interest, they thereafter have the right to request to assume the loan. Please note, per Investor guidelines, most investors will not allow a non-borrower (including a confirmed successor in interest), to sign for a loan modification unless they have also assumed the loan. If the successor in interest is looking for a modification in order to get the loan current, they would need to assume the loan.

 

A mortgage assumption occurs when an individual assumes personal liability for a borrower’s existing mortgage debt in connection with the transfer from the borrower to the individual of the property interest securing the mortgage.

Talk to your legal counsel to find out which options is best for you.

It depends on your situation. The clearing of title is what usually takes the longest depending on what liens and judgements there may be against the property.

No. The terms of the Note will remain the same after it is assumed. If the loan was modified before you assumed it, the modified terms will also remain the same.

Either the current obligor, or the person who is assuming the loan must make the payments. The two parties must decide that between themselves. The loan must remain current to complete the assumption.

The new deed will have the name of the person(s) that will be liable for the loan after it is assumed.

You become personally liable for the debt so you must be sure you can make the payments. There are closing costs that you must pay out of pocket.

For some programs, you must assume the loan to complete the modification. For programs in which an assumption is not required, you can request it if you want to become liable for the loan.

It depends on your situation and the terms of your loan. We will review your eligibility after we receive all the documents we need.

This change could be made, based on the reason for the assumption. But in most cases, a change like that is not allowed, per Investor guidelines.

No, as a confirmed successor in interest you may apply for any available loss mitigation option without first assuming the loan, though acceptance of an option may be contingent on the assumption of the loan. As the confirmed successor in interest, you may also have the option to request a transfer of ownership on the loan which does not require an assumption. Here are the differences between these two options:

  • With a transfer of ownership, you would receive access to account information, statements and other communications about the account. Please consult with a tax professional prior to making any decision regarding the mortgage debt.
  • With an assumption, you’ll become financially liable for payment of the mortgage loan. You would also receive the same access to loan information, and we’ll report payment information to the credit reporting agencies in your name. Closing costs are required.

To remove a borrower from a loan, you do have to qualify for a release of liability.

No, closing costs cannot be included in the assumed amount as they can with a loan refinance. You must pay all closing costs at closing.

You must pay all closing costs with the Title Company and/or real estate attorney. Also, any fees owed on the loan must be paid before or at closing. Fees vary from state to state. An estimate of the costs will be provided to you before the closing.

In either case you will need the final documents that show who holds the rights to the property.

If one co-borrower is being released from liability and one co-borrower will remain liable, you must submit a full assumptions and release of liability package.

No, as a confirmed successor in interest you may apply for any available loss mitigation option without first assuming the loan, though acceptance of an option may be contingent on the assumption of the loan. As the confirmed successor in interest, you may also have the option to request a transfer of ownership on the loan, which does not require an assumption. Here are the differences between these two options:

  • With a transfer of ownership, you would receive access to account information, statements and other communications about the account. Please consult with a tax professional prior to making any decision regarding the mortgage debt.
  • With an assumption, you will become financially liable for payment of the mortgage loan. You would also receive the same access to loan information, and we will report payment information to the credit reporting agencies in your name. Closing costs are required.

Not necessarily. You may add your spouse as an Authorized Third Party, which will grant him or her access to the account and all information. If you chose to assume, your spouse would become liable for the loan payments and the loan would appear on his or her credit report.

Fax to: 305 646 4581

Email to:
CLSAssumptions@communityloanservicing.com

Mailed to: Community Loan Servicing LLC.

Attn: Assumptions

4425 Ponce De Leon BLVD, 5th Floor

Coral Gables, FL 33146

ASSUMPTION GLOSSARY OF TERMS
Assumption Package
  • The application packet that Community mails out when someone is asking to be reviewed for an assumption and/or release of liability. This package provides the applicant 30 days to get the needed documents back to Community. If documents are not timely received, the application will be denied and closed out.


The Assumption Package includes the following:

  • General Authorization for a Mortgage Loan Assumption
  • Mortgage Assumption Cover Sheet
  • List of documents needed to start the assumption/release of liability process
  • FAQ’s
  • Electronic Disclosure Agreement
  • Email Consent Form
  • 1003 – Uniform Residential Loan Application
  • Applicant Acknowledgement and Agreement
  • Customer Information Worksheet
  • Uniform Applicant Assistance Form (Form 710)
  • W-9
  • 4506C
Missing Document Letter The Missing Document Letter details the documents/conditions needed to complete a package. This letter provides the applicant 30 days to get the needed documents back to Community.
Denial Letter The Denial Letter is provided to an applicant in the event the requested documents are not submitted within 30 days.

NOTE: The application can also be denied based on investor requirements, unresolved lien/title issues, and applicant’s failure to complete the application. 

Lien Letter The Lien Letter is provided to an applicant when there is a lien or judgement on title that needs to be satisfied in order to close the transaction.
Uniform Residential Loan Application Community Loan Servicing requires a complete Uniform Residential Loan Application in order to provide a Loan Estimate to the applicant.

Below is a list of some of the information collected on this application:

  • Income;
  • Assets;
  • Mailing address;
  • Property address;
  • Social Security Number;
  • List of liabilities and the monthly payment; and
  • List of rental properties and the monthly liabilities for each property.
Loan Estimate (LE) The Loan Estimate is generated when an applicant has provided all necessary information in the application. The Loan Estimate provides the applicant with an estimate of the costs associated with the transaction.
Closing Disclosure (CD) The closing disclosure is the final document that is generated to show the applicant a breakdown of their final costs to close the transaction. Community will obtain a final title bill from the title company to ensure that we have all fees accounted for. This is also one of the documents signed at closing by the applicant as part of their closing documents.

  • Assumption Request:

» Initiates the mailing of an assumption package by Community Loan Servicing. Community gives the applicant 30 days to submit the required documents back.  If nothing is received within the 30 days, Community then proceeds.

  • Assumption Processing:

» Once an application is submitted to Community, we move to processing. Here is where we review the documents received and send out the Missing Documents Letter if there are still documents needed. This is also the stage where we send a Loan Estimate to the applicant if necessary personal information is provided with the application.

  • Assumption Underwriting/Title Stage:

» Once we have all of the documents requested from on the assumption application and the missing document letters, we send them underwriting for review. We may send out a Missing Documents Letter, requesting additional financial documents needed to clear income. Note: In some cases, we need to request investor approval.

» Once we have received all documents and have cleared income we then must review title for clear/unclouded title on the property.  The assigned title company will make the determination on whether title is clear. If there are liens or judgements, the title company will advise whether those liens or judgements are required to be satisfied. If required to be satisfied, the applicant is made aware of the situation via the Lien Letter.

  • Assumption Closing/Post-Closing Stage:

» At this stage, title is clear and we are ready to send the applicant the Closing Disclosure. The title company will contact the applicants to schedule the closing. Once the closing takes place, and the loan documents are signed and counter-signed by all the applicable parties, the documents are sent out for recording within the county wherein the property is located. The assuming party is now personally liable for the mortgage loan and is responsible for making the loan payments.

This package will explain the mortgage assumption process, provide the necessary forms, and serve as a road map for you to complete your request quickly and easily.

Please click HERE to download the package.