This GT Alert covers the following:
CFPB Report on Mortgage Service COVID-19 Pandemic Response Metrics for May-December 2021;
Report Metrics: Service Portfolio, Call Metrics, COVID-19 Hardship Forbearance Requests, COVID-19 Hardship Forbearance Exits, Late Payments, Borrower Profiles;
CFPB encourages mortgage servicers to improve outreach to borrowers exiting forbearance and to closely monitor data on borrower demographics and outcomes.
On May 16, 2022, the Consumer Financial Protection Bureau (CFPB or Bureau) released a report on COVID-19 response metrics based on its “observations from data obtained from 16 major mortgage servicers from May through December 2021 (report). This report is a follow-up to an August 2021 report on the Bureau’s observations on data collected from December 2020 to April 2021 (reporting period).
In a press release accompanying the report, CFPB Director Rohit Chopra said: “[w]While many mortgage servicers have been successful in helping borrowers avoid foreclosure, today’s report highlights that some servicers are lagging behind their peers and are less well-equipped to help borrowers who have exited pandemic home protection.” Director Chopra stated, “[w]We will closely monitor the performance of mortgage servicers to ensure they are meeting their legal obligations.”
As we previously reported in April, May and June 2021, the CFPB has strengthened its regulatory and enforcement scrutiny of mortgage servicers and finalized its pandemic mortgage servicing rules.
The report’s stated purpose is to “identify areas of risk in service providers’ response to the COVID-19 pandemic.” The report examines servicing portfolios, call metrics, COVID-19 hardship forbearance applications and exits, delinquencies, and borrower profiles from a “broad cross-section of the mortgage servicing industry,” for the May-December 2021 period.
Analysis of the report
The report analyzes six key data points and provides insight into the performance of mortgage servicers serving borrowers who need COVID-19 mortgage repayment assistance.
service portfolios. The servicing portfolios examined in the report contain a mix of government-backed loans (86%) and private loans (34%).
view metrics. The report analyzes the number of consumer inquiries to servicer call centers. In the relevant period, the servicers reported a total monthly call volume of between 3.32 and 3.64 million inquiries.
In addition to call volume, the report focuses on three other key metrics: average response speed, abandon rates, and average handle time. Analyzing the data, the Bureau notes that most service providers reported stable call data throughout the reporting period. However, the Bureau has found that several service providers have reported spikes in both average response speeds and abandonment rates. These service providers had average hold times of over 10 minutes and abandonment rates of over 30%. These metrics indicate that borrowers may have difficulty obtaining telephone support from certain service providers, particularly if these metrics remain elevated.
COVID-19 hardship forbearance enrollments and withdrawals. Registrations for COVID-19 hardship cases have been declining since peaking in mid-2020. During the period, filings fell from 163,000 to 68,000 for government-backed loans and from 42,000 to 17,000 for private loans.
Monthly COVID-19 hardship exits ranged from 60,000 to 90,000 for government-backed loans and 10,000 to 19,000 for private loans. The report aggregates data on loan status at the time of exit, including past due loans with no existing loss mitigation, modification, foreclosure, short sale, and deed in lieu of foreclosure. Across servicers, 15.2% of borrowers ended their forbearance with no existing loss mitigation. As the Bureau notes, phasing out forbearance without a mitigation solution exposes borrowers to increased risk of foreclosure, adverse credit reports and further delinquencies.
Crime. Delinquency is a new metric the CFPB has not previously tracked in relation to COVID-19 forbearance. Default rates on government-backed loans have remained constant between 0% and 15%. There was one notable exception — a subprime servicer of government-backed loans — which regularly reported delinquency rates in excess of 20%. Default rates for personal loans have been generally constant, with most service providers reporting rates below 15%. However, several private credit servicers reported interest rates in excess of 30%. Overall forbearance delinquent churn rose from 9,000 in May to 21,000 in October before falling to 14,000 in December.
Borrower Profiles. The CFPB requested the borrower’s language preference and demographic information to gain an understanding of borrowers with limited English proficiency (LEP) and ethnic minorities. The report finds that the completeness and quality of this data varies widely between service providers. With regard to breed, the data variation among service providers was so great that the Bureau was unable to make comparisons.
Notwithstanding limited data on LEP borrowers, the information shows an increasing trend of borrowers defaulting after forbearance without loss mitigation. The report notes that this could indicate greater challenges in obtaining information in the language to access available mitigation options. The CFPB warns that failure to serve LEP borrowers and provide access to information and access to financial products and services for which they qualify could result in violations of the Equal Credit Opportunity Act (ECOA). The Bureau “encourages service providers to ensure that LEP borrowers who require loss mitigation after the end of forbearance are serviced in a manner consistent with the services provided to all other borrowers,” and “to improve their data collection and storage of the language preferences of the Borrowers” to improve communication and access to information and retention opportunities. The Bureau’s current position that service providers must deploy robust LEP services contradicts existing CFPB LEP guidance issued during the last term, which indicated that appropriate disclosure of gaps in LEP coverage throughout the product lifecycle would represent a significant mitigation of compliance risk to consumers.
In summary, the report highlights potential problem areas related to the availability of telephone support for all borrowers and language information and access for LEP borrowers. It signals that the CFPB is monitoring borrowers’ access to support both generally and specifically in relation to language resources. The report further demonstrates CFPB’s focus on ECOA compliance, particularly when read in conjunction with the May 9, 2022 Advisory Opinion and the previous April statements, guidance and regulations of the Bureau on Pandemic Mortgage Servicing Standards 2021 will be read.
The CFPB concludes its press release on the report by telling service providers: “[t]The CFPB’s continued monitoring and oversight of the mortgage market shows that borrowers are still grappling with the aftermath of the pandemic, and the CFPB encourages mortgage servicers to increase outreach to borrowers exiting forbearance and to share data on demographics and to closely monitor the results of borrowers.”
©2022 Greenberg Sad, LLP. All rights reserved. National Law Review, Volume XII, Number 139