The post-financial crisis years have become an era of heightened regulation in which mortgage servicers are constantly under a microscope. The Consumer Financial Protection Bureau was created by the government in 2011 in order to protect the financial interests of consumers, and a large portion of complaints they have received from consumers have been related to mortgage servicing.
Servicers voiced their concerns when the CFPB's expanded Consumer Complaint Database went live last month, giving consumers an opportunity to include a narrative with their complaints published online. In an effort to provide more context and insight to the complaints on mortgage servicing received by the CFPB, Black Knight Financial Services and the Five Star Institute released a white paper on Friday titled Analysis and Study of CFPB Consumer Complaint Data Related to Mortgage Servicing Activities to positive reactions from those within the industry.
The data in the white paper showed that on average, mortgage servicers received only 13 complaints for every 10,000 non-performing loans and only one complaint for every 10,000 performing loans as of Q4 2014.
"We have less than one basis point, 0.73 complaints per loan in Q1 of 2013 and while we did see a slight rise through Q4 2014 it’s really insignificant," said Dori Daganhardt, VP of Product Marketing, Data, and Analytics Division with Black Knight, and the author of the white paper. "It doesn’t suggest that we get an A plus as an industry on managing the complaints related to performing loans, but I think it does suggest that there is more discovery that can be done. Just like if you are an economist and you know the natural rate of unemployment, I would think there is a natural rate of complaints relative to loans. I think it merits some additional study on what that might look like."
The report gives the added insight to the complaints received by comparing the Bureau's two predominant mortgage complaint categories, servicing and default, with loan trends. The report includes publicly available data from both the CFPB and mortgage servicers, as reported from the CFPB database.
"The report helps servicers understand how they are performing vs the average and whether we have the same pain points as our peers," said Bob Caruso, EVP of servicing, sales, and strategy at ServiceLink, a Black Knight company. "We're all happy that complaint volume is low but also quite aware that we have more opportunity to improve. My hope is that consumers better understand that although the industry has been through a lot, we are better for it and will continue to improve. Complaints are much lower than we think customers may be aware."
Five Star President and CEO Ed Delgado, who initially proposed the idea for the report last year, stated that the purpose of the report was not to "dismiss or diminish" the validity of the inquiries by consumers, but rather to "position and better understand the data."
A spokesperson from the CFPB did not respond to a request for comment on the report. But at least one government agency was pleased with the added insight the report provided.
"A 53 percent reduction in complaints about loan modifications and foreclosures is great news," Freddie Mac spokesman Brad German said. "I would attribute much of the improvement to the rising diligence and effectiveness of many servicers plus the impact of the Servicing Alignment Initiative, which requires early and frequent outreach to borrowers who need assistance." A spokesperson from Fannie Mae declined to comment on the report when reached by email.
One of the purposes of the added information provided by the report was to allow mortgage servicers to benchmark themselves against the rest of the industry.
"I believe the report provides some needed context relative to both the overall level of complaints and the positive impact of the efforts of the servicing industry has had on reducing the level of complaints filed with CFPB, particularly associated with non-current loans," said Ray Barbone, EVP of Mortgage Services, BankUnited. "More specifically, notwithstanding the fact it has been widely publicized that mortgage servicing issues are one of the highest segments of complaints and that there have been thousands of such complaints received, it is equally worth noting that, according to the report, complaints related to general servicing of performing loans appears to be running at less than one 1/100th of a percent. It would be interesting to see a comparison of similar analyses for other financial services segments as well as non-financial service industries. Further, I think the report provides lenders with the benefit of some very high-level data by which to benchmark themselves."
Tim Rood, Chairman of the Washington, D.C.-based Collingwood Group, said, "I thought the report was insightful and should quiet critics of the industry's customer service."
Kim Yowell, SVP and Servicing Manager for Tulsa-based BOK Financial, said, "The aggregated data confirms that the measures the mortgage banking industry has undertaken to address default related customer issues and complaints has had a positive impact on our customers."
Some servicers say they would like to see the data expanded even further. John Varol, SVP of Mortgage Servicing Strategy Executive at U.S. Bank, said, "Good report. It's helpful for industry comparison purposes. I would like to see more a comprehensive industry comparison, beyond CFPB complaints."
"I would like to see the industry and CFPB continue to work together to provide even deeper context relative to complaints received, particularly regarding the percentage of complaints verified," Barbone said.
Hester Peirce, Senior Research Fellow at George Mason University, had previously said in an open letter to the CFPB that "other than verifying that the customer has a relationship with the company that is the subject of the complaint, the Bureau makes no attempt to assess the veracity of facts, let alone whether the financial institution named in the complaint has violated a law." Following the release of the white paper, she stated, "I took a look at the report and find the analysis quite interesting. However, I continue to question the ability of the CFPB database to generate useful data given the way the Bureau collects and processes the information."
Editor’s note: Ed Delgado is president and CEO of the Five Star Institute, parent company of DS News and MReport.