Many homeowners are falling behind on their mortgages.
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The Consumer Financial Protection Bureau (CFPB) released a report this week showing that mortgage complaints to the government agency have risen to their highest level in three years.
The CFPB received approximately 38,100 mortgage origination and servicing complaints from January 1, 2020 through March 31, 2021, which is about 5% of all complaints the CFPB received during this period. The volume of overall mortgage complaints increased to more than 3,400 complaints in March 2021—the greatest monthly mortgage complaint volume since April 2018.
Many consumers complained that servicers did not provide clear and accurate information about their options. In particular, consumers reported that servicers were not providing information about loss mitigation until after the consumer’s forbearance had ended, and that the information provided about post-forbearance options was confusing and incomplete.
According to the Mortgage Bankers Association’s estimate, 2.23 million homeowners are in forbearance plans. Total loans in forbearance decreased by 2 basis points relative to the prior week: from 4.49% to 4.47%.
The CFPB has encouraged mortgage servicers to take all necessary steps to prevent a wave of avoidable foreclosures this fall. Millions of homeowners currently in forbearance will need help from their servicers when the pandemic-related federal emergency mortgage protections expire this summer and fall.
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“There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months,” stated CFPB Acting Director Dave Uejio in April. “Responsible servicers should be preparing now. There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming.”
Uejio indicated that CFPB’s first priority is ensuring struggling families get the assistance they need. “Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families,” he said.
Key findings of the CFPB complaint bulletin include the following forbearance issues:
A common topic raised by consumers in mortgage forbearance complaints concerned servicers’ communications. Some consumers expressed frustration that servicers did not communicate clearly about which relief options would be available when their forbearance period ended. In particular, some of these consumers were concerned about what would happen to forborne payments and about whether they could extend a forbearance period.
Many of these complaints stemmed from phone calls with servicers, suggesting that servicers may not be clearly communicating about the variety of available options.
Some consumers reported that after calling their servicers, they were left with the impression that a lump sum payment, repayment plan or modification were the only post-forbearance options available. The possibility of modifying their loans by moving all missed payments to the end of the loan term was not clearly communicated or discussed during some of these conversations.
Other consumers reported that they were not informed that their loan was ineligible for deferrals until after their forbearance plan ended. Some consumers described confusion with mandatory account notices. Others reported long delays in modifying their loan to address forborne payments.
Based on complaints and servicer responses, the CFPB suggests consumers would benefit from clearer communication from servicers over the phone and in writing.
“Servicers that are proactive in communicating before the end of the forbearance period may help give consumers sufficient time to understand all available relief options and to apply for help,” the report states.
Some mortgage servicers might soon find themselves subject to heightened supervisory and enforcement activities.
“There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months, stated Uejio in April. “Responsible servicers should be preparing now. There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming. Our first priority is ensuring struggling families get the assistance they need. Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families.”
Mike Fratantoni, the Mortgage Bankers Association’s senior vice president and chief economist, recently expressed optimism about the housing market’s financial health.
“The share of loans in forbearance decreased for the ninth straight week, dropping by 2 basis points,” he said. “The rate of exits has slowed the past two weeks, with this week’s exit rate reaching the lowest since February.”
Fratantoni added, “Job market and housing market data remain strong. We expect that further gains in hiring will help to support many homeowners as they exit forbearance in the months ahead.”