Among a total of 32,000 consumer complaints received by the Consumer Financial Protection Bureau (CFPB) in 2021, only approximately 300 of those complaints — under 1% — had to do with the subject of reverse mortgage loans. This is according to the Bureau’s recently-released Consumer Response Annual Report, compiled under the authority of the Dodd-Frank Wall Street Reform and Consumer Protection Act which gave birth to the CFPB.
This report follows a recent analysis by RMD which took a closer look at reverse mortgage-related complaints processed by the CFPB since the beginning of the COVID-19 coronavirus pandemic in March of 2020, which indicated that while a small share of total mortgage-related consumer complaints the Bureau received, reverse mortgage complaints still accelerated during the pandemic period.
During the 2021 calendar year, the CFPB received approximately 32,000 complaints related in some way to the mortgage industry. The Bureau then sent 84% of these complaints (approximately 26,900) to the companies they were directed to, while 10% of them were forwarded to different federal regulatory agencies. 5% of the mortgage complaints received were determined not to be actionable in the CFPB’s view.
Companies responded to 98% of the complaints they received, while 88% of the complaints were closed with a company explanation. 3% of complaints were closed with non-monetary relief, while 4% were closed with some kind of monetary relief.
“Companies provided an administrative response for 1% of complaints,” the report explains. “As of February 1, 2022, 1% of complaints were pending review by the company. Companies did not provide a timely response for 2% of complaints.”
Among those mortgage-related complaints in which “the compan[ies] confirmed a commercial relationship with the consumer and responded with an explanation or relief,” 94% of such complaints were initiated by the consumer only after they unsuccessfully attempted to deal directly with the company themselves. At that point, consumers submitted their complaints to CFPB.
In general, the volume of mortgage-related complaints increased in 2021 according to the CFPB analysis.
“Among the types of mortgages consumers identified in their complaints, the monthly average for conventional home mortgages increased 13% compared to the monthly average for the prior two years,” the Bureau describes in the report. “The monthly average for VA mortgage complaints increased 17% compared to the monthly average for the prior two years.”
As was also the case in RMD’s analysis of reverse mortgage complaint data earlier in the year, the most common complaint stemmed from “trouble during the payment process,” the report says.
“Complaint volume about this issue peaked in early 2021 before generally declining for the
remainder of the year,” CFPB explained in the report. “Similarly, complaint volume for the mortgage issue applying for a mortgage or refinancing an existing mortgage peaked in early 2021 before declining for the remainder of the year. Part of this trend may be explained by the increase in origination activity and consumers attempting to take advantage of lower interest rates.”
Reverse mortgage-specific issues
Reverse mortgage issues have long represented a minority of mortgage-related complaints received by the CFPB, with similar thresholds of roughly 1% having been recorded as far back as 2016. However, reverse mortgages also represent a very small fraction of the broader mortgage market, and the amount of complaints tend to fluctuate commensurately with the size of the reverse mortgage industry.
As of April 8, 2022, 691 consumer complaints about reverse mortgages have been submitted to the CFPB since March of 2020, the month that President Donald Trump declared a national emergency due to the pandemic and soon after suspended all foreclosures and evictions. In the fully recorded period between August of 2017 and January 2022, a total of 1,551 reverse mortgage complaints have been recorded by the agency.
Since the onset of the pandemic in March 2020, the monthly average over the majority of the pandemic period has slightly lowered to 26.9 per month from an average of 30 in the two-year period preceding the pandemic. The three-month average over the period between October, 2021 and January, 2022 is much higher at 43. During the pandemic period, the single month with the highest number of reverse mortgage complaints was November 2021, which saw 51 complaints recorded by the CFPB.
Similarly to the March 2022 report detailing complaint data in calendar 2021, far and away the biggest reason consumers offered complaints about reverse mortgages stemmed from “trouble during the payment process,” according to the data. Nearly 45% of complaints recorded during the pandemic period attributed this as the reason for submitted complaints. “Struggling to pay” was the next most common reason, with 19% of complaints stemming from this issue.
Since the onset of COVID-19, the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) have aimed to make a series of sweeping additions to provide for reverse mortgage borrower relief and expanded loss mitigation options. Some of the pandemic relief since 2020 has included allowing both exterior-only and desktop-only appraisals, instructing servicers to delay reverse mortgage due-and-payable requests during the national emergency, delaying foreclosures and evictions and allowing the electronic submission of HECM case binders.
Servicing issues, new contractor
Shortly after RMD published its February report detailing CFPB consumer complaint trends over the course of the pandemic, RMD received additional analysis of the CFPB data breaking out the companies that led the reverse mortgage complaint tallies submitted to the CFPB. Over 20% of all reverse mortgage-related complaints featured the prior Home Equity Conversion Mortgage (HECM) servicing contractor as the source of the complaints, according to CFPB data.
FHA had been aiming to find a new servicing contractor to help fix remaining back-end loan issues at the end of the Trump administration, according to 2020 comments from U.S. Department of Housing and Urban Development (HUD) and FHA personnel. However, well into the term of the Biden administration, HUD announced in October 2021 that while it had awarded a new servicing contract on a host of single-family forward mortgage programs, the Secretary-Held HECM loans and HECM subordinate mortgages at that point remained unchanged according to an FHA informational notice.
Servicing issues have consistently been one of the most-discussed pain points by reverse mortgage industry participants for an extended period of time. It was not until March 2022 that HUD announced that Lansing, Mich.-based Celink had been awarded the FHA Single Family Secretary-Held HECM Assets contract and will provide loan servicing for HECM reverse mortgage loans sponsored by FHA. According to the contract’s entry on a website administrated by the U.S. Government’s General Services Administration (GSA), the total contract value is just over $169 million and the “period of performance” will be for a one-year base period and four additional option years.
Reverse mortgage industry response to the news was very positive, with lenders and representatives of the National Reverse Mortgage Lenders Association (NRMLA) lauding Celink’s understanding of the subject matter.
Read the CFPB’s Consumer Response Annual Report.