The Consumer Financial Protection Bureau (CFPB) has its hands full. Its latest undertaking: fielding a wave of complaints from consumers burned by mortgage lenders.

Forged to protect American consumers in the financial market, the CFPB has received an influx of consumer complaints every year since its inception under the Dodd-Frank Wall Street Reform and Consumer Protection Act. 2013 proved to be a vociferous year for mortgage-related grievances. Of the 163,700 complaints it received, 59,900—a whopping plurality of 37% of the total—were from consumers reporting issues with mortgage loans. Other complaints were directed at credit card abuse and the like.

Let’s take a moment to drill down into this 59,900 figure. The CFPB breaks down the type of mortgage complaints into the following categories:

  • problems resulting from an inability to  pay, e.g. loan modifications, collections and foreclosures – 59%
  • making payments, e.g. loan servicing and escrow accounts  – 26%;
  • applying for a loan, e.g. applications, originators and mortgage brokers – 8%;
  • signing an agreement, including the settlement process and costs – 4%;
  • receiving a credit offer, e.g. credit decisions and underwritings – 2%; and
  • other – 1%.

Many complaints detailed the assessment of exorbitant fees by mortgage lenders, while some reported their lender’s failure to honor previously agreed-to loan modifications. California court cases document this fact of life for debtors coping with shattered promises from mortgage lenders. [Cansino v. Bank of America (2014)_CA4th_; Wilson v. Hynek (2012) 207 CA4th 999]

More importantly, how is the CFPB’s track record when it comes to successfully resolving these complaints?

Amazingly, lenders responded to 93% of all complaints received in 2013 and closed 89% of those complaints. However, only 66% of consumers who submitted mortgage-related complaints accepted the responses from the lenders they reported.

With mortgage settlements and criminal prosecutions against lenders recently taking center stage, it’s no surprise mortgage-related complaints are also on the rise. A little knowledge flowing to the public over a year or two perfects an understanding of the public’s rights. Ultimately, this awareness (and personal experience) changes behavior. Lenders, of course, blame the messengers of all this data and information, claiming the critics are the culpable party causing all their problems. Moi?

The CFPB’s complaint catalog is a reflection of public awareness of the mortgage industry’s misaligned conduct during the Millennium Boom and recovery years. It is the media reporting of unearthed shady dealings and predatory lending that is triggering public awareness.

To curb consumer damage, the CFPB has taken serious measures. In 2012, it rolled out the new Loan Estimate and Closing Disclosure forms for home loans. Its “Know Before You Owe” forms replaced the Good Faith Estimate (GFE), Truth in Lending Disclosure and HUD-1 forms with a user-friendly alternative. Mortgage borrowers are now provided with more transparency to avoid surprises.

As for lenders? Replete beyond reason with self-interest and adulation, mortgage lenders have demonstrably failed at self-regulation, and CFPB is filling the vacuum. In the process, the CFPB (and the public at large) is becoming no stranger to the unethical behavior of lenders.

In 2013, the CFPB cracked down on lenders by introducing additional guidelines for qualified mortgages, newly minted and now in effect.

More regulation is yet to come down the pipeline, as the CFPB recently announced proposed changes to the Home Mortgage Disclosure Act (HMDA).

CFPB has thus far proven its grit as the first government agency to aggressively face down lender lobbyists. CFPB is also the nation’s first ever agency committed to consumer protection. With the number of complaints now doubling down, consumers, likely under the guidance of their real estate agents, are also becoming more aware of their options and demanding support.

That’s right: consumers have a voice, and it’s now officially roaring.

The recent numbers speak for themselves: mortgage lenders still need strict oversight to ensure consumers are on equal bargaining footing and all involved are kept out of trouble.

Though the high volume of homeowner complaints about lenders may seem alarming at first blush, it’s certainly no surprise. The CFPB’s steady flow of regulations enabled by Dodd-Frank and its effective record of handling consumer complaints is a promising indicator of the law enforcement to come. CFPB is fast becoming the neighborhood cop with an eye on wrongful lender conduct. And this neighborhood cop isn’t afraid of getting its hands dirty.

 

Re: CFPB awash in mortgage complaints from HousingWire