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New data: Consumers are already struggling with COVID-related mortgage servicing problems.

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Mortgage servicers failed Americans during the last recession. And if early data from the Consumer Financial Protection Bureau is any indication, history may well be on its way to repeating.

Last week, I published a blog post describing the challenges homeowners could face with mortgage servicers amid the disruption caused by COVID. Then, on May 21, I searched for complaints from the Consumer Complaint Database that both concern mortgage servicing and mention the coronavirus, and downloaded the 219 complaints fitting those criteria.[1]

In addition to basic categorical data for each complaint, the database includes narratives that provide more detailed descriptions of consumer experiences, in their own words. This is a feature of the database that we and our partners at U.S. PIRG called for following the launch of the database, and was launched in 2015.

These narratives make it possible to search for key words to find complaints that mention the coronavirus crisis, as well as to get a clearer picture of what kinds of problems consumers are having with mortgage servicers. After reading through each narrative, five issues stand out:

1. 181 complaints (37% of the total) describe a mortgage servicer offering a relief plan that won’t offer much actual relief – typically a plan requiring a lump sum or balloon repayment following the period of payment relief.

One such complaint alleges, “My husband and I are both [REDACTED] and neither of us has any income at all due to the corona virus. We contacted our lender [Ocwen] to ask for temporary forbearance, but they are telling us they will offer a 3 month forbearance and then the entire amount needs to be paid at the end of 3 months. How is this fair? If we end up being out of work for the full 3 months, are we supposed to perform a magic trick and instantly come up with the money in 3 months?”

2. 57 complaints (26% of the total) allege communication problems with the servicer, including long phone wait times, or untimely or lack of response to written communications. Many of these complaints describe the consumer being unable to either obtain relief or confirm that they have been put on a relief plan.

From one complaint, of trying to get forbearance from Suntrust: “After being on hold for four hours the line automatically goes dead. This has happened to me three times now. I have no idea how to get a hold of a customer service agent to help me.” Another complaint alleges “To this date, we have received no confirmation of receipt of our request for forbearance, nor approval of the same and Freedom Mortgage is sending us dunning notices with threats of late fees.”

3. 12 complaints describe problems involving mortgages being transferred between servicers – something that could theoretically become a bigger problem if mortgage servicing companies face a wave of bankruptices.

According to one complaint “We didn't want our mortgage sold, and now it's been sold to an institution that is offering fewer services and options. This situation is magnified even more during a crisis where we all are struggling to stay healthy and acquire food.”

4. Two complaints describe consumers being placed into forbearance without actually requesting it.

According to one complaint: “I contacted my mortgage servicer, Freedom Mortgage by phone on [DATE REDACTED], for informational purposes only, to see what programs they were offering during the COVID-19 pandemic … I received a letter from Freedom Mortgage stating I was approved for a 3 months forbearance plan, and while on this plan my property would be subjected to one or more inspections, any payment I sent would be held in a suspense account and applied only after all fees related to the forbearance plan had been settled.”

5. Many complaints allege servicers demanding documentation of hardship as a condition of receiving forbearance – a seeming violation of CARES Act provisions.

One complaint alleges “They [Freedom Mortgage] are still asking for documentation in order to validate the claim of Hardship due to Covid-19 such as Financial Reports and Bank Statements.”

These complaints aren’t confined to any one type of mortgage, or one type of company. The 219 mortgage complaints are for Federal Housing Administration mortgages, Veterans Administration home loans, and conventional mortgages. And they concern both non-bank financial companies (led by Freedom Mortgage Company and Shellpoint Partners, LLC, with 32 complaints each) and banks (led by Truist, with 19 complaints, and Wells Fargo, with 14 complaints.)

These complaints suggest that homeowners of all stripes are facing real problems with their mortgage servicers. With homes on the line, the stakes are high. And for many consumers, time may be running out for getting the help they need.

In the weeks and months ahead, regulators and public officials should keep close tabs on consumer complaints, to ensure that companies are following the law, and that sufficient policies are in place to protect consumers. The Consumer Complaint Database serves as a canary in the coalmine for spotting problems in the financial marketplace. Now is a critical time to put it to use.


   

[1] Specifically, complaints matching the following criteria:

  • Date: 3/1/2020 or later
  • Product: Mortgage
  • Issue: “Struggling to pay mortgage” or “Trouble during payment process” (issues typically associated with mortgage servicing)
  • Consumer complaint narrative: Contains text mentioning the coronavirus crisis, based on a search for complaints containing the text: covid OR coronavirus OR pandemic OR (corona AND virus) OR (global AND virus). An up-to-date version of these search results is available to view or download at: https://bit.ly/3d5yLOP.