In certain situations such as a divorce or inheritance, the ownership of a home shifts without a typical sale of a property. Homeownership shifts like this trigger certain legal requirements of the mortgage lender, which is why it’s important for the new owner to understand the processes involved.
In keeping with our mission to keep homeowners as informed as possible, we’re providing this guide to explain what could happen in this common circumstance.
What Is a Successor in Interest?
In the mortgage industry, a successor in interest refers to someone who acquires ownership of a mortgaged property but was not originally a borrower on the loan. This person steps into the legal and financial shoes of the original borrower in specific ways, especially when dealing with servicing rights, foreclosure protections, or loan modifications.
Common Scenarios
- Inheritance: A family member inherits a home after the borrower dies.
- Divorce: One spouse is awarded the home in a divorce settlement.
- Transfer to a trust: The borrower transfers the property into a living trust.
- Surviving joint tenant: A co-owner becomes sole owner after the other passes away.
Why It Matters
Under federal regulations (like Regulation X of the Real Estate Settlement Procedures Act), mortgage servicers must recognize successors in interest and provide them with:
- Access to loan information
- Protection from foreclosure
- Eligibility for loan assumption or modification
This helps ensure that individuals who acquire property through life events aren’t left unprepared for the responsibility or unfairly penalized.
Key Considerations
- The successor must provide documentation proving their legal interest in the property. These documents will vary depending on the circumstances of the change in ownership, and may include:
- Court documents
- Death certificate(s)
- Divorce decree
- Will or trust documents
- The successor does not automatically assume the loan, but may request to do so.
- Servicers are required to communicate clearly and promptly once a successor is identified.
- The mortgage must be paid, despite the change in ownership.
What to Do if You Become a Successor in Interest
If you acquire a home by inheritance, divorce or other circumstance, reach out to Newrez as soon as possible. Gather up documents that prove the transfer of ownership and provide them to us. From there, a Newrez mortgage expert will be glad to discuss options with you, depending on how you’d like to handle the mortgage. For more information, contact us at 866-317-2347.