Nov. 2015-Opportunity Knocks

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Th e M Rep o RT | 45 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t the latest SERVICING cFPB spotlights consumer complaints regarding mortgage servicing transfers and loan mods A little more than half of mortgage-related complaints to the CFpB in August dealt with homeowners having difficulty making their monthly payments. i n the third edition of the monthly complaint snapshot released in late September, the Consumer Financial Protection Bureau (CFPB) turned its focus on the problems consumers are facing with mortgage servicing. The bureau received 25,732 complaints in August, and 4,574 of those (17.7 percent) were about mortgages, making it the third- most complained about cat- egory 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, the CFPB ex- amined problems consumers face with mortgage servicing in certain circumstances. More than half of the 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 modi- fication process were a frequent subject of the complaints, while others said they were not considered for all loss mitigation options available, they were in- correctly 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 foreclo- sure proceedings while the loan mod application was pending (known as dual-tracking). 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, and about 192,500 (27.3 percent) of those com- plaints have been about mort- gages, 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 af- fordable 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, dif- ficulty 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 prob- lematic when it occurred when the borrower had a loan modification pending or foreclosure proceedings were in the works; some consum- ers stated they would not have lost their homes if the loan transfer had not occurred. The CFPB's consumer com- plaint snapshot has generated some controversy. In late August, the National Association of Federal Credit Unions (NAFCU) wrote a letter to the CFPB recommending the bureau cease publishing the monthly snapshot, saying 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 informa- tion 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. The CFPB also recently final- ized changes made to its mort- gage rules to expand mortgage credit access to small creditors, especially in rural and under- served areas. The rule was originally brought about in January and will increase the number of financial institu- tions that are able to offer certain mortgages in rural and under- served areas. In addition, credi- tors will be given ample time to change their business practices 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," Cordray said. "These changes will help consumers in rural or under- served areas access the mortgage credit they need, while still maintaining these important new consumer protections." The CFPB issued several mort- gage rules in January 2013 and May 2013 including the Ability-to-Repay rule, which protects consum- ers from irresponsible mortgage lending. The Ability-to-Repay rule directly affects small creditors in rural and underserved areas. 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

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