The Consumer Financial Protection Bureau (CFPB) released two reports showing that more work needs to be done to help mortgage borrowers coping with the COVID-19 pandemic and economic downturn.
The first report documents that Black and Hispanic mortgage borrowers are much more likely to be delinquent or in a forbearance program than white borrowers. In a second report, the CFPB says overall mortgage complaints to the CFPB have risen to their highest level in three years.
“More borrowers are behind on their mortgage than at any time since the height of the Great Recession,” says CFPB Acting Director Dave Uejio. “Communities of color have been hit hard by the pandemic, and the latest data show that many borrowers are still hurting. 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 CFPB is seeking comments on a proposal intended to help prevent avoidable foreclosures for borrowers affected by the COVID-19 emergency. That proposal, if finalized, would temporarily require servicers to enhance communications with borrowers who are delinquent or in forbearance, allow servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships, and require servicers to afford all borrowers a special pre-foreclosure review period. The comment period closes May 10.
The CFPB’s research brief, “Characteristics of Mortgage Borrowers During the COVID-19 Pandemic,” shows that some homeowners and communities are more at risk than others.
- Borrowers in forbearance or delinquent are disproportionately Black and Hispanic. For example, 33% of borrowers in forbearance (and 27% of delinquent borrowers) are Black or Hispanic, while only 18% of the total population of mortgage borrowers are Black or Hispanic.
- Loans in forbearance or delinquent are disproportionately likely to have high loan-to-value (LTV) and limited equity, leaving them vulnerable to being underwater. For example, half of all loans in forbearance have an LTV greater than 60%, compared to only 34% of current loans. Borrowers who are behind on their payments but not in forbearance are more than five times as likely to have an LTV greater than 95% than borrowers who are current on their payments.
- Forbearance and delinquency are significantly more common in communities of color (defined as majority minority census tracts) and lower-income communities (defined by census tract income quartiles).
The CFPB also notes that in March 2021, consumers submitted more mortgage complaints to the agency than in any month since April 2018. Mortgage complaints mentioning forbearance or related terms have also reached their highest monthly average since March and April of 2020, and the number of borrowers who report they are struggling to make their payments is also trending upward.
The complaint bulletin highlights the problems consumers in forbearance are having getting the help they need.
- Servicer communications: Many consumers complained that servicers did not provide clear and accurate information about their options. In particular, consumers reported that servicers were not providing information about loss mitigation until after the consumer’s forbearance had ended, and that the information provided about post-forbearance options was confusing and incomplete. The CFPB encourages servicers to use all available tools to reach struggling homeowners and to do so in advance of the end of the forbearance period.
- Delays and denials of loan modifications: Consumers reported long delays in having their loan modified so that they could resume payments on the mortgage. In some cases, these delays were due to demands for additional documents by servicers. In other cases, consumers said servicers provided conflicting information about what options were available and the consumer’s eligibility for loan modification. The CFPB expects servicers to handle inquiries promptly, to evaluate income fairly, and to work with borrowers throughout the loss mitigation process.
