CFPB Issues Annual Report on Consumer Complaints: What the Mortgage Industry Should Know

Since it opened its doors in 2011, the CFPB has accepted consumer complaints on a variety of consumer products. Beginning with credit card complaints in 2011, the CFPB has expanded its complaint portal to accept complaints on debt collection, credit reporting, mortgage, bank accounts and services, student loans, pay day loans, prepaid cards and other products. On April 1, the CFPB issued an Annual Report synthesizing consumer complaints in 2015 and the CFPB’s response. Here are the important takeaways for the mortgage industry:

 

The Good News? The good news for the mortgage industry is that consumer complaints showed a slight decrease in 2015 when compared to 2014. In 2014, mortgage complaints comprised 20% of all complaints received by the CFPB (51,200 in total). In 2015, that percentage decreased to 19% (or 50,800). The slight decrease allowed credit reporting to jump into second place for the most complaints in 2015.  

 

The Bad News? Nine percent of the consumer mortgage complaints handled by the CFPB were referred to other regulatory agencies for further investigation.

 

Problems When Unable to Pay. As suggested in prior posts, the leading complaint category for mortgage involves problems that arise when the consumer is unable to pay. This category encompasses loan modification, collection and foreclosure issues and it shouldn’t come as a surprise to anyone that 43% of all mortgage complaints in 2015 were placed in this category. The mortgage industry should pay close attention to these issues and review their Compliance Management Systems to insure compliance with RESPA and Regulation X as litigation continues to increase in line with the concerns expressed by consumers below.

• Loan Modification Concerns. Particularly, the Report notes that consumers complain about delays and ambiguity in the review of their modification applications. Complaints include:
•  Failure to be included for all available loss mitigation options;
•  Incorrectly being denied a modification;
• Terms of the approved modification were unfavorable; and
• Frequent changes in the single point of contact during review of the loan modification application.
• Foreclosure Concerns. With respect to foreclosure, three primary areas of concern were identified:
• Issues with short sales- particularly, the credit reporting of short sales as foreclosures and second lien holders failing to accommodate short sales;
• Confusion about the fees assessed during foreclosure and particularly, the barrier these fees present to reinstatement; and
• Concerns with mortgage servicers commencing foreclosure while modification applications remain under review.
•  Servicing Concerns. Complaints with regard to servicing tend to focus on issues arising during the transfer of the account from one servicer to another.

Making Payments. The second most prevalent mortgage complaint (37% of all mortgage complaints) involves the posting of payments and the management of escrow accounts. Consumers typically complain about the misapplication of payments and the refusal of servicers to accept partial payments. Consumers’ complaint indicate some issues with servicers disbursing tax payments from escrow in a timely manner.