A man obtained a residential mortgage with our bank. His wife is not on the title to the home, and she is not obligated on the note. From what we understand, the couple is now separated but not yet divorced, and the wife occupies the residence alone. The husband has stopped making the mortgage payments. Can our bank treat the wife as a successor-in-interest on the mortgage and send her information about the loan so that she might take over the payments? We are a small servicer.

No, we do not believe that your bank should treat the wife as a successor-in-interest to the note or mortgage.

Generally, a person becomes a successor-in-interest when an ownership interest in mortgaged property is transferred in one of the ways enumerated in Regulation X, such as a transfer of ownership through a divorce decree or legal separation agreement. In this case, your bank does not yet know whether there has been such a transfer of ownership to the wife. Consequently, we do not believe that your bank should treat the wife as a successor in interest.

We also recommend against sending information about the mortgage loan to the wife, who is not your bank’s customer, because such communications would not fit any of the exceptions to the federal and Illinois prohibitions on disclosing a customer’s personal financial information to a third party. Your bank may send certain information regarding the mortgage loan to the wife as a potential successor-in-interest, but only if the wife has submitted a written request to your bank indicating that she may become a successor-in-interest.

For resources related to our guidance, please see:

Regulation X, 12 CFR 1024.31 (“Successor in interest means a person to whom an ownership interest in a property securing a mortgage loan subject to this subpart is transferred from a borrower, provided that the transfer is:

(1) A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;

(2) A transfer to a relative resulting from the death of a borrower;

(3) A transfer where the spouse or children of the borrower become an owner of the property;

(4) A transfer resulting from a decree of a dissolution of 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

(5) 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 rights of occupancy in the property.”)

Regulation X, 12 CFR 1024.36(i)(1) (“Potential successors in interest. (1) With respect to any written request from a person that indicates that the person may be a successor in interest and that includes the name of the transferor borrower from whom the person received an ownership interest and information that enables the servicer to identify the mortgage loan account, a servicer shall respond by providing the potential successor in interest with a written description of the documents the servicer reasonably requires to confirm the person's identity and ownership interest in the property and contact information, including a telephone number, for further assistance. With respect to the written request, a servicer shall treat the potential successor in interest as a borrower for purposes of the requirements of paragraphs (c) through (g) of this section.”)

Regulation P, 12 CFR 1016.15(a)(7) (A bank may disclose nonpublic personal information “[t]o comply with Federal, state, or local laws, rules and other applicable legal requirements.”)

Illinois Banking Act, 205 ILCS 5/48.1(c)(11) (“Except as otherwise provided by this Act, a bank may not disclose to any person, except to the customer or his duly authorized agent, any financial records or financial information obtained from financial records relating to that customer of that bank unless: (11) The furnishing of information under any other statute that by its terms or by regulations promulgated thereunder requires the disclosure of financial records other than by subpoena, summons, warrant, or court order.”)