On July 8, 2014, the CFPB issued an interpretive rule (click here) clarifying that when a person (“successor”) who has previously acquired title to the successor’s principal dwelling subsequently agrees to be added as obligor or substituted for the existing obligor on a consumer credit transaction secured by that dwelling (“loan”), the creditor’s written acknowledgement of the successor as obligor is not subject to the Ability-to-Repay Rule (ATR Rule) in §1026.43 of Regulation Z because that transaction is not an assumption as defined by §1026.20(b) of Regulation Z. The interpretive rule will typically apply when a successor has received legal interest in the successor’s principal dwelling by transfer from a family member, by operation of law upon another’s death, or under a divorce decree or separation agreement and subsequently agrees to become an obligor on the loan. The interpretive rule may also apply when an inter vivos trust is created by a borrower who transfers his or her interest in the dwelling into the trust under which the borrower is a beneficiary and the trust subsequently becomes an obligor on the loan.
