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Work group weighs disclosure to alert consumers when mortgages may be assumable
Summary
Industry and commission staff debated a draft tied to Sen. Sturtevant that would notify borrowers when mortgages may be assumable; lenders warned conventional (Fannie/Freddie) loans are rarely assumable and urged outreach to servicers and precise wording; the group favored an education/notification approach rather than changing legal assumability.
Bill West, representing the Virginia Mortgage Bankers Association, and other members discussed a draft linked to Senator Sturtevant about notifying borrowers that some mortgages may be assumable.
West cautioned that FHA and VA loans are broadly assumable by contract but the majority of conventional loans backed by Fannie Mae and Freddie Mac are not broadly assumable except in limited circumstances (for example, death, divorce, or trust transfers). He warned that a poorly worded statewide disclosure could mislead consumers and could indirectly affect servicing values and borrowing costs by altering how servicers price and market loans.
Work group members agreed the utility of a disclosure depends on wording, timing and reach. The small group recommended an education-first approach: refine the language (avoid putting the notice only in escrow disclosures since not all loans have escrows) and coordinate with servicers and listing agents so that when a loan may be assumable the right information is communicated to potential buyers. The chair asked staff to work with the sponsor to strengthen accuracy and consider pairing the disclosure with additional consumer education rather than mandating broad legal changes.
No formal vote was taken; staff agreed to pursue edits and outreach to servicers and stakeholders.
