The Consumer Financial Protection Bureau (CFPB) released two reports showing issues which need to be tackled to help mortgage borrowers with COVID-19 related foreclosure and forbearance issues.
In March 2021, consumers submitted more mortgage complaints to the CFPB than in any month since April 2018. Mortgage complaints mentioning forbearance or related terms have also reached their highest monthly average since March and April of 2020, and the number of borrowers who report they are struggling to make their payments also is trending upward.
The complaint bulletin highlights the problems consumers in forbearance are having getting the help they need.
- Servicer communications: Many consumers complained servicers did not provide clear and accurate information about their options. In particular, consumers reported servicers were not providing information about loss mitigation until after the consumer’s forbearance had ended, and the information provided about post-forbearance options was confusing and incomplete. The CFPB encourages servicers to use all available tools to reach struggling homeowners and to do so in advance of the end of the forbearance period.
- Delays and denials of loan modifications: Consumers reported long delays in having their loan modified so that they could resume payments on the mortgage. In some cases, these delays were due to demands for additional documents by servicers. In other cases, consumers said servicers provided conflicting information about what options were available and the consumer’s eligibility for loan modification. The CFPB expects servicers to handle inquiries promptly, to evaluate income fairly, and to work with borrowers throughout the loss mitigation process.
The CFPB recently sought comments on a proposal to help prevent avoidable foreclosures for borrowers affected by the COVID-19 pandemic. The proposal would temporarily require servicers to enhance communications with borrowers who are delinquent or in forbearance, allow servicers to offer certain streamlined loan modification options to borrowers with COVID-19 related hardships, and require servicers to afford all borrowers a special pre-foreclosure review period. The comment period closed May 10.
The other report documented that Black and Hispanic borrowers are more likely to be delinquent or in a forbearance program than white borrowers.
The CFPB’s research brief, “Characteristics of Mortgage Borrowers During the COVID-19 Pandemic,” shows that some homeowners and communities are more at risk than others.
- Borrowers in forbearance or delinquent are disproportionately Black and Hispanic. For example, 33 percent of borrowers in forbearance (and 27 percent of delinquent borrowers) are Black or Hispanic, while only 18 percent of the total population of mortgage borrowers are Black or Hispanic.
- Loans in forbearance or delinquent are disproportionately likely to have high loan-to-value (LTV) and limited equity, leaving them vulnerable to being underwater. For example, half of all loans in forbearance have an LTV greater than 60 percent, compared to only 34 percent of current loans. Borrowers who are behind on their payments but not in forbearance are more than five times as likely to have an LTV greater than 95 percent than borrowers who are current on their payments.
- Forbearance and delinquency are significantly more common in communities of color (defined as majority minority census tracts) and lower-income communities (defined by census tract income quartiles).