On April 1, 2016, the CFPB published its monthly consumer complaint snapshot. See generally, CFPB Monthly Complaint Rep., Apr. 2016. In addition to highlighting trends in consumer complaints received by the CFPB, the April report spotlights mortgage loan-related complaints.
Perhaps unsurprisingly, the spotlight shows that 82% of the complaints received by the CFPB related to default servicing (51%) and making payments (31%). By contrast, only 14% of consumer complaints related to the loan origination process, which included complaints about the loan application process, executing loan agreements, and receiving credit offers.
In relation to mortgage loan products, consumers complained the most about “other” products (42%)—though it is unclear exactly what the CFPB means by “other products” in this context. In terms of specific mortgage loan products, consumers complained most about conventional fixed-rate mortgages products (30%); while ARMs and FHA mortgage products were virtually tied for second place, with 11% and 10%, respectively. HELOCs, VA mortgages and reverse mortgages brought up the rear representing a combined 8% of complaints.
The spotlight also highlights specific consumer complaints about mortgage loans, including:
- Loss Mitigation: Consumers complained about difficulties communicating with the servicer about loss mitigation activity, stating that they received conflicting and contradictory information about the process.
- Servicing Transfer: Consumers complained that they were not adequately informed about servicing transfers, and that their payments are misapplied after a transfer took place.
- Payment Application: Consumers complained that their payments—particularly those made during the loss mitigation process—were not applied as they intended.
- Communications With Servicer: Consumers complained that general communications with servicers—such as clarifications about reinstatement amounts, charges, fees, interest rate increases—were met with confusing responses.
- Escrow Collection: Consumers complained about over-collection, unexplained shortages, and untimely disbursement.
- Application of Property Insurance Proceeds: When consumers sent insurance checks to servicers, they complained that servicers unnecessarily delayed releasing funds to effect repairs.
- Loan Origination Process: Consumers complained that they were required to submit multiple applications, and that processing delays led to loss of favorable interest rates.
To the extent that the spotlight portends the CFPB’s rulemaking and enforcement focus, its findings are important for lenders and servicers to consider. The CFPB’s findings reveal that the vast majority of consumer complaints relate to mortgage loan servicing—in fact, except for one complaint about confusion during the loan origination process, every other complaint related to servicing. It is also possible to see a common thread running through consumers’ complaints: customer communication. Across many of the complaint categories, consumers complained that they often come away confused after communicating with their servicers. Lenders and servicers may want to bear this point in mind. Efforts to improve clarity in communications could have the effect of reducing consumer complaints across the board, and with it, may lessen the likelihood of litigation and scrutiny by the CFPB and other regulators.