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Law360 (May 4, 2021, 20:01 EDT) –
O Consumer Financial Protection Bureau released a report on Tuesday finding that general mortgage complaints to the agency have risen to their highest level in nearly three years, with the most common problem reported since January 2020 being “problems during the payment process”.
According to the complaints bulletin, there were more than 3,400 complaints in March 2021, the highest monthly volume of mortgage complaints since April 2018. Among the complaints were communication problems related to tolerance plans and options available at the end of these plans, confusion with mandatory bill notices and long delays in modifying loans to cope with deferred payments.
CFPB acting director Dave Uejio said in a statement that more borrowers are behind on their mortgages 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 shows that many borrowers are still suffering,” said Uejio. “The CFPB will continue to actively seek and respond to market developments, doing everything in our power to help families stay in their homes. As we warned mortgage agents last month, unpreparedness is unacceptable.”
The number of borrowers late on mortgage payments has doubled since the pandemic began, the agency said. Although the number of borrowers who indicated that they were struggling to pay their mortgages increased in March and April 2020, it declined in the following months before recovering again in 2021 and only recently has recovered pre-pandemic levels.
The agency partially attributed that reduction to the Coronavirus Aid, Relief and Economic Security Act, which went into effect in March 2020 and offered relief to homeowners with federally supported mortgages.
Mortgage complaints that mention lenient keywords skyrocketed in March and April 2020, before declining in May and June. After that, the volume of mortgage indulgence claims remained stable until it increased again in March 2021, according to the report.
The report was released a month after the CFPB decided to modify its mortgage service rules due to an expected increase in borrowers who stepped out of pandemic-related tolerances this fall, revealing a proposal package which includes a temporary moratorium on new foreclosures until the end of the year.
The proposed moratorium would take the form of a “pre-foreclosure review period” that would prohibit mortgage brokers from initiating foreclosure proceedings until after December 31, a measure that the CFPB said was aimed at giving defaulting borrowers more time to think of alternatives for closure because COVID-19 relief measures are due to expire at the end of this year.
If finalized as written, the proposed CFPB review period would take effect at the end of August and would be in addition to the standard requirement that servicers cannot begin the foreclosure process until the mortgage is 120 days late.
Among its other proposals, the CFPB launched a change that would give mortgage agents more flexibility to offer loan modifications to borrowers affected by the pandemic based on incomplete loss mitigation information. He also proposed adding certain discussion topics that servicers would be required to address when making direct contact with a struggling borrower starting this fall.
Public comments will be accepted on the proposed CFPB regulation by 10 May.
According to a separate report released Tuesday on the characteristics of borrowers during the pandemic, black and Hispanic borrowers are much more likely to be in default or on a tolerance program than white borrowers.
Black and Hispanic borrowers represent 33% of tolerant borrowers and 27% of defaulting borrowers, as reported through March 2021, despite representing only 18% of all mortgage borrowers, according to the report.
The report also indicated that, by March 2021, 50% of debtors with patience and 51% of defaulting debtors had a relationship between the loan amount and the amount above 60%, while only 34% of the debtors who were up to date had.
“Borrowers with an LTV rate above 95 percent, who may be the most vulnerable to being submerged in their mortgages, made up a significant portion of those who were in default (5 percent), compared to borrowers who were in default. in tolerance (1 percent) or current (less than 1 percent), “says the report.
–Additional report by Jon Hill. Editing by Karin Roberts.
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