California is a step closer to signing a bill into law to protect families from foreclosure after the death of the primary mortgage note holder. The Bill is known as the “Survivor Bill of Rights”. Other states may soon follow in passing similar laws.
When a spouse dies, often the surviving spouse can’t afford the mortgage payment. The survivor usually calls the lender to let them know the spouse has died. When the survivor tries for a loan modification due to loss of income, they’re denied the modification and go into foreclosure. Lenders may accept the survivor’s mortgage payments, but homeowners who aren’t listed on the loan can face high restrictions and foreclosure. Housing counselors report 44% of servicers always or almost always decline to discuss loan modifications with widowed clients when they weren’t listed on the loan.
Loans were given out like candy before the housing bubble burst. If one spouse had a low credit score, only the spouse with the higher credit score would sign the promissory note. This practice continues today.
The Consumer Financial Protection Bureau (CFPB) doesn’t have an exact amount for how many complaints they’ve received from a surviving spouse. The CFPB established new protections for surviving spouses January 2014. The CFPB is proposing additional rules to make it harder for lenders and their bill collectors to foreclosure on properties that have passed to surviving spouses and children.
In California, Laura Biggs, a surviving widow, brought to attention this serious problem of the surviving spouse. When her husband Kenny died, her mortgage company concluded the house was no longer Kenny’s primary residence since he had died. Laura’s name was not on the loan. Laura fought to keep her home, even trying for a loan modification with her name only, siting ‘loss of income’ with Kenny’s death. Select Portfolio Servicing (SPS), on behalf of Bank of America wrote a letter addressed to Laura’s deceased husband stating, “We are unable to offer you a HAMP modification because the property is not your primary residence.” The house went into foreclosure.
There is a happy ending to this story. Laura retained an attorney to help her save her home. Just days before her home was to be auctioned, the law firm uncovered a monthly fee that didn’t seem normal. When they asked the lender if it were an insurance fee - there was silence on the other end.
Kenny had taken out a special insurance to protect Laura if he died. The $100,000 policy would pay off all but $20,000 of the loan if he died. When Kenny died, no one told Laura there was an insurance policy. They continued to charge Laura the insurance premium every month along with her mortgage payment. The law is murky on notification requirements. Laura had to wait many months for the policy payoff. When she was issued a check, it was for $24,512.65. Through her attorneys the insurer finally sent another check for $75,487.35. Laura’s attorneys have filed suit against Bank of America and SPS.
The treatment of surviving spouses, their mortgages and insurance policies is an example of how much dysfunction remains in the housing finance system.
If you are a surviving spouse, and are in foreclosure, facing foreclosure, have an issue with your mortgage, or have issues with your loan modification Gantenbein Law Firm's Denver real estate attorneys immediately. Widely considered to be the top mortgage and foreclosure defense attorneys in Colorado, Gantenbein Law Firm's experienced foreclosure and real estate lawyers will expertly counsel on surviving spouse foreclosure, mortgage and loan modification options. For more information, or to schedule a consult of your case, visit their Colorado Foreclosure Defense page.
Gantenbein Law Firm also practices Tax Law, Business Law, Estate Planning, Wills and Probate Law, Real Estate Law and HOA Law. Gantenbein Law Firm will assist in exploring the best options for your case: for a consultation, call 303-618-2122. For more information on these practice areas, visit www.gantenbeinlaw.com.