By: Edward R. Milhorn, Compliance Consulting Director
At the beginning of May, the Consumer Financial Protection Bureau (“CFPB”) issued a Special Issue Brief titled “Characteristics of Mortgage Borrowers During the COVID-19 Pandemic” (“Brief”). The Brief analyzed demographics for a sample of nearly 662,000 loans for owner-occupied properties. Within the Brief, the CFPB noted that an estimated 4.7% of owner-occupied properties were in forbearance as of March 2021 and that 0.5% of mortgage loans were 60 or more days delinquent.
Among the notable characteristics of the loans in forbearance, was that they were more likely to have a high loan-to-value (“LTV”) ratio. Per the CFPB’s analysis, approximately half of the loans in forbearance have an LTV of 60% or higher. The report also indicated that “Black and Hispanic borrowers, who together make up 18 percent of all mortgage borrowers and 16 percent of current borrowers in our data, make up a significantly larger share of borrowers who were in forbearance (33 percent) or delinquent (27 percent) as reported through March 2021.” Additionally, based on survey data, the CFPB’s report indicated that “Black and Hispanic homeowners were more than two times as likely as white homeowners to be behind on mortgage payments as of December 2020.”
In a separate release, the CFPB issued a Complaint Bulletin (“Bulletin”), which outlines mortgage forbearance issues described in consumer complaints. Per the Bulletin, although the complaint volume has been relatively steady since January 2020 (averaging around 2,500 per month), the CFPB noted that overall, mortgage complaints rose to their highest level in three years in March 2021 (more than 3,400 complaints). Among the most common issues noted within these complaints was trouble during the payment process. More specifically, the Bulletin noted the following key findings related to the content of mortgage-related consumer complaints:
- Some consumers experienced various communication issues related to forbearance plans and options available at the end of these plans.
- Some consumers described confusion with mandatory account notices.
- Some consumers reported long delays in modifying their loan to address forborne payments.
It is important to note that the CFPB indicated that the demographic information reported within the Brief “should be interpreted with caution, because the representativeness of the sample may be different compared to other publicly available sources.” However, institutions should still be aware of these studies as loans near the end of mortgage forbearance and next steps take shape. Relatedly, in early April, the CFPB also issued a proposed rule outlining “Mortgage Servicing Changes to Prevent Wave of COVID-19 Foreclosures.” Although, this proposal exempts small servicers, it may serve as a blueprint for how all financial institutions should approach the end of the forbearance period in order “to help prevent avoidable foreclosures as the emergency federal foreclosure protections expire.” For those who are interested, you may view the Brief here and the Complaint Bulletin may be found here. Additionally, information about the proposed rule may be found here.