Service Complaints Amid Pandemic Forbearance Confusion

As the mortgage industry has pivoted and reorganized in response to the COVID-19 pandemic, the likelihood that certain steps in the mortgage process have not received the required attention and care necessary for a successful loan is perilously high. Data recently released in regard to the federal government’s foreclosure moratorium and COVID-19 forbearance program suggests that many providers are behind the curve when it comes to keeping customers apprised of their options in today’s uncertain financial climate.

On February 16, the Biden administration announced that foreclosure protections temporarily put in place to protect mortgage owners who are financially affected by the pandemic would be extended until June 30 on federally guaranteed mortgages. It was also announced that the forbearance enrollment window would be extended until June 30 for borrowers wishing to participate. However, while acting as a bulwark for customers against the potential loss of their mortgages and homes, this forbearance program has also seemingly led to an upswing in customer communication issues, putting additional strain on an already overburdened financial employee base. A report released by the CFPB on May 8 noted that the consumer protection agency received over 3,400 complaints related to servicing in March 2021 alone, the highest level in over three years.

This upswing in complaints from confused or angry homeowners correlates directly to these forbearance and foreclosure moratorium rules and regulations. The CFPB report noted that customers are not receiving clear information about their current options, what those options will be once the moratorium ends, and what loss mitigation procedures might look like, post-forbearance. Over two million Americans are currently making use of forbearance options and the CFPB warned that the financial industry could see a “tidal wave” of panicked homeowners later this year once the moratorium ends if their options are not clearly defined and explained to them. Particularly troubling for servicers in the latest data drop is that the number of loans currently in forbearance actually *decreased* two basis points, from 4.49 percent to 4.47, while CFPB complaints continued to show a steady rise (3).

The CFPB’s proposed solution to this looming potential disaster involves modifications to Regulation X that would allow servicers to more easily find a way to adjust loan payment options, grant a ‘pre-foreclosure review period’ to give borrowers more time to get payments back on track, and keep borrowers informed of their options at all times.

This latter proposal is particularly crucial when it comes to servicer communication and social media advertising. Loan providers walk an extremely fine line when it comes to complying with RESPA if they are not also diligently providing both current and potential borrowers with accurate, updated information regarding their rights and options under the current moratorium.

Open and honest communication on social networks provides confidence to consumers that a provider is fully invested in their satisfaction and best interests, but can pose a problem if ill-informed loan officers discuss forbearance options. This brand of public-facing attentiveness can be a very effective and wide-reaching tool to allay the fears of a servicer’s customer base with keeping their mortgage on track during these uncertain times, but companies should ensure staff have undergone proper training on this topic prior to the use of social media.