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Financial Services Law Insights and Observations

CFPB reports on Covid-19 mortgage borrower challenges

Federal Issues CFPB Covid-19 Mortgages Consumer Finance

Federal Issues

On May 4, the CFPB released two reports analyzing mortgage borrowers’ challenges due to the ongoing Covid-19 pandemic. The first report explores the characteristics of borrowers who are delinquent or in forbearance based a sample of nearly 662,000 loans for owner-occupied properties. The report shows that Black and Hispanic borrowers are more at risk than others, as they comprised 33 percent of borrowers in forbearance (and 27 percent of delinquent borrowers) while only constituting 18 percent of the total population of mortgage borrowers. Other findings include that (i) loans reported in March 2021 as being in forbearance or delinquent were “more likely than current loans to be single-borrower loans and to have been 30+ days delinquent in February 2020,” and (ii) “the share of loans with [a loan-to-value] ratio above 60 percent was significantly larger for borrowers in forbearance (50 percent) or delinquent (51 percent) compared to those who were current (34 percent).”

The second report examines mortgage forbearance issues described in consumer complaints from the 2020 Consumer Response Annual Report. According to the complaint bulletin, the mortgage complaint volume “has remained relatively steady since January 2020, averaging around 2,500 complaints per month,” while peaking to 3,400 complaints in March 2021—the greatest monthly mortgage complaint volume in nearly three years. The most common issue reported since January 2020 was consumers experiencing difficulty during the payment process. The bulletin also highlights that: (i) many consumers reported that servicers were not providing advice about loss mitigation until after the consumer’s forbearance had been terminated; and (ii) consumers reported long delays in having their loans modified so they could resume payments on their mortgages.

The CFPB also issued a reminder in its press release that it is seeking comments on a proposal intended to help prevent avoidable foreclosures for borrowers affected by the Covid-19 pandemic. As covered by a Buckley Special Alert, the proposal 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, if finalized. The CFPB indicated that a final rule implementing the proposal will take effect August 31—a tight timeline to address public comments, which are due May 10.