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Law360 (May 4, 2021, 8:01 PM EDT) -- The Consumer Financial Protection Bureau released a report Tuesday finding that overall mortgage complaints to the agency have risen to their highest level in nearly three years, with the most common issue reported since January 2020 being "trouble during the payment process."
According to the complaint bulletin, there were more than 3,400 complaints in March 2021, the greatest monthly mortgage complaint volume since April 2018. Among the complaints were problems with communication related to forbearance plans and options available at the end of those plans, confusion with mandatory account notices, and long delays in modifying loans to address postponed payments.
CFPB acting Director Dave Uejio said in a statement that more borrowers are behind on their mortgage than at any time since the height of the Great Recession.
"Communities of color have been hit hard by the pandemic, and the latest data show that many borrowers are still hurting," Uejio said. "The CFPB will continue to seek and actively respond to developments in the market, doing everything in our power to help families stay in their homes. As we warned mortgage servicers last month, unprepared is unacceptable."
The number of borrowers behind on their mortgage payments has doubled since the beginning of the pandemic, the agency reported. Though the number of borrowers who indicated that they were struggling to pay their mortgage increased in March and April 2020, it declined in the following months before picking up again in 2021 and only recently regained pre-pandemic levels.
The agency partially attributed that decrease to the Coronavirus Aid, Relief and Economic Security Act, which went into effect in March 2020 and offered relief for homeowners with federally backed mortgages.
Mortgage complaints mentioning forbearance keywords shot up in March and April 2020 before decreasing in May and June. After that, the volume of mortgage forbearance complaints remained steady until increasing again in March 2021, according to the report.
The report comes a month after the CFPB moved to modify its mortgage servicing rules in light of an expected surge in borrowers exiting pandemic-related forbearances this fall, unveiling a package of proposals that includes a temporary moratorium on new foreclosures through the end of the year.
The proposed moratorium would take the form of a "pre-foreclosure review period" that would prohibit mortgage servicers from initiating foreclosure proceedings until after Dec. 31, a measure that the CFPB said was intended to give delinquent borrowers more time to work out alternatives to foreclosure as COVID-19 relief measures start to expire later this year.
If finalized as written, the CFPB's proposed review period would go into effect at the end of August and would be in addition to the standard requirement that servicers can't begin the foreclosure process until a mortgage is 120 days delinquent.
Among its other proposals, the CFPB floated a change that would give mortgage servicers more flexibility to offer loan modifications to pandemic-affected borrowers based on incomplete loss mitigation information. It also proposed adding certain discussion topics that servicers would be required to bring up when making direct contact with a struggling borrower starting this fall.
Public comments will be accepted on the CFPB's rulemaking proposal through May 10.
According to a separate report released Tuesday on borrower characteristics during the pandemic, Black and Hispanic mortgage borrowers are much more likely to be delinquent or in a forbearance program than white borrowers.
Black and Hispanic borrowers make up 33% of borrowers in forbearance and 27% of delinquent borrowers as reported through March 2021, despite only making up 18% of all mortgage borrowers, according to the report.
The report also indicated that through March 2021, 50% of borrowers in forbearance and 51% of delinquent borrowers had a loan-to-value ratio above 60%, while just 34% of borrowers who were current did.
"Borrowers with an LTV ratio above 95 percent, who may be the most vulnerable to being underwater on their mortgage, made up a significant share of those that were delinquent (5 percent), compared to borrowers that were in forbearance (1 percent) or current (less than 1 percent)," the report reads.
--Additional reporting by Jon Hill. Editing by Karin Roberts.
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