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CFPB Complaint Report Finds Loan Mod Issues; Mortgage Credit Access Expands to Rural Areas

CFPBIn the third edition of the monthly complaint snapshot released Tuesday, the Consumer Financial Protection Bureau (CFPB) turned its focus on its most complained-about financial product—mortgages—to take a closer look at the problems consumers are facing with mortgage servicing.

The Bureau received 25,732 complaints in August 2015, and 4,574 of those (17.7 percent) were about mortgages, making it the third-most complained about category behind debt collection (29 percent) and credit reporting (22 percent). The CFPB reported that it received 972 fewer complaints in August than it did in July.

For August 2015, the CFPB examined problems consumers face with mortgage servicing in certain circumstances. More than half of those complaints about mortgages (53 percent) had to do with problems consumers faced when they were unable to make payments, particularly when applying for a loan modification to avoid foreclosure. Ambiguity and/or delays in the loan modification process were a frequent subject of the complaints, while others said they were not considered for all loss mitigation options available, they were incorrectly denied a modification, or the terms of the modification were unfavorable. Still others complained of frequent changes in the single point of contact or that the servicer pursued foreclosure proceedings while the loan mod application was pending (known as dual-tracking).

"Despite strong protections that have been put in place to protect homeowners, this month’s complaint report shows consumers are still having problems when dealing with their mortgages."

The CFPB began accepting complaints from consumers about financial products shortly after opening its doors in July 2011. As of September 1, 2015, the Bureau had received 702,900 complaints in slightly more than four years, and about 192,500 (27.3 percent) of those complaints have been about mortgages, making it overall the most complained-about category. The mortgage market is the largest consumer financial marketplace in the country with more than $10 trillion in total value. The CFPB enacted new mortgage rules in 2014 to ensure strong consumer protections and also ensure that lenders offered affordable mortgages to consumers.

"Despite strong protections that have been put in place to protect homeowners, this month’s complaint report shows consumers are still having problems when dealing with their mortgages," CFPB Director Richard Cordray said. "The Bureau will continue to work to make sure that consumers are being treated fairly on their mortgage issues."

About 30 percent of consumers' mortgage complaints expressed confusion and frustration with regards to the payment process when loans are transferred, citing unexpected payment increases, difficulty determining who should be paid, or that the borrower was not informed that the loan was being transferred. Some borrowers said the transfer was even more problematic when it occurred when the borrower had a loan modification pending or foreclosure proceedings were in the works; some consumers stated that had they would not have lost their homes if the loan transfer had not occurred.

Click here to view the CFPB's complete monthly complaint snapshot for August 2015.

The CFPB's consumer complaint snapshot had generated some controversy. In late August, the National Association of Federal Credit Unions (NAFCU) wrote a letter to the CFPB recommending that the Bureau cease publishing the monthly snapshot, saying that the analytics are not based on an industry-wide collection of data; they provide only an "insular view of market-data based only on complaint information that the CFPB receives" and therefore do not paint a complete picture. NAFCU stated that the CFPB is incorrectly characterizing the narratives submitted online as statistically relevant "trends and analyses, according to Kavitha Subramanian, Regulatory Affairs Counsel for NAFCU.

9-22 CFPB graph

The Consumer Financial Protection Bureau (CFPB) als0 recently finalized changes made to its mortgage rules to expand mortgage credit access to small creditors, especially in rural and underserved areas.

The rule was originally brought about in January and will increase the number of financial institutions that are able to offer certain mortgages in rural and underserved areas. In addition, creditors will also be given ample time to changes their business practice to comply with the rules.

“The financial crisis was not caused by community banks and credit unions, and our mortgage rules reflect the fact that small institutions play a vital role in many communities,” said Richard Cordray, CFPB director. “These changes will help consumers in rural or underserved areas access the mortgage credit they need, while still maintaining these important new consumer protections.”

The CFPB issued several mortgage rules in January 2013 and May 2013 including the Ability-to-Repay rule, which protects consumers from irresponsible mortgage lending. The Ability-to-Repay rule directly affects small creditors in rural and underserved.

The final rule will take effect January 1, 2016.

Editor's Note: The Five Star Institute and Black Knight Financial Services published a study in April adding more context to the complaints received in the CFPB's database. The Five Star Institute is the parent company of The MReport and TheMReport.com.

Click here to view a copy of the final rule.

About Author: Xhevrije West

Xhevrije West is a writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.
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