A surge of mortgage complaints spotlights communication issues

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Complaints about mortgages and mortgage servicers are on the rise, according to the Consumer Financial Protection Bureau.

In a bulletin released this month, the agency reported that March saw the highest volume of mortgage-related consumer complaints in nearly three years: more than 3,400 in that month alone, compared to less than 3,000 each month since at least January 2020.

Though the CFPB didn’t comment on why the complaint volume may have gone up this spring, at least one industry insider had her own theory.

“Some of it may be due to forbearance coming up and payments coming due,” said Jennifer Kouchis, senior vice president of real estate lending at VyStar Credit Union in Jacksonville, Florida. “Consumers have really suffered because they didn’t understand the process and it wasn’t relayed to them in a manner that was understanding.”

Supporting Kouchis’ position, most of the mortgage-related complaints CFPB tracked in March had to do with forbearance.

Here were some of the most common complaints and what borrowers can do about them. The short version is: communicate with your loan servicer early and often.

Poor communication from the servicer

The top complaint from mortgage borrowers in March was trouble communicating with their servicer.

Borrowers don’t have much control over how easy it is to get in touch with their mortgage administrator — they’re not the ones hiring call center operators. But they can be proactive about communicating to make the process of coming out of forbearance smoother.

“They need to reach out to the lender. If they can’t reach them by phone, go into a branch. If they can’t go to a branch, they need to send a written letter,” Kouchis said. “They need to continue to take action if they’re not getting responded to in a reasonable time.”

Desmond Brown, CFPB’s assistant director of consumer education, said that it’s also a good idea for borrowers to document any conversations they have with their provider, to make sure the guidance they receive remains consistent.

“Take notes of these calls,” he said. “At this date, at this time I spoke to this person and this is what we agreed to.”

CFPB has a guide to requesting mortgage forbearance, which includes questions to ask your lender at every step of the process.

Confusing mortgage statements

This is its own branch of poor communication: a lot of borrowers were concerned when looking at their mortgage statement that their loan appeared to be “delinquent” while it was in forbearance.

And here, again, communication is key. If you’re having trouble understanding your statement, or something seems off, you should be in touch with the servicer as soon as possible.

Kouchis said she heard from some of her clients that they didn’t understand why they were receiving a statement while they were in forbearance, and she explained that lenders are required to send regular billing statements even if you’re not making payments.

“You’re not making payments as promised, so technically yes, you’re in that delinquent stage, but no late charges or negative credit will occur during the forbearance period,” she said. “That’s why I really encourage consumers to reach out to the servicer through any avenue they can.”

Delay or denial of loan modification requests

Coming out of forbearance can be its own fraught process. Some lenders may require borrowers to make up their missed payments in a single lump sum, while others will allow extra payments to be added to the end of the loan. Still others have other terms, and it can be confusing for borrowers to know what their options are.

“It might take over-communicating with servicers to get to the bottom of what relief options might be available,” said Greg Evans, CFPB’s regulatory compliance program manager. “It’s possible that their loan is eligible to defer all of those payments.”

Kouchis agreed that it’s crucial to explicitly ask about other options if a lender says your only choice is to make a single lump-sum payment to come out of forbearance. Even if they tell you that, other options like extra payments at the end of the loan might be on the table.

“Some lenders and credit unions aren’t offering that unless you ask,” she said.

Emerging forbearance issues

This catch-all category included a number of forbearance-related complaints like inaccurate information when a loan comes out of forbearance, issues extending forbearance or properly applying payments made while the loan is still forborne.

Maybe you’ve noticed a trend by now, but the solution here, too, is more communication.

“There should be some form of documentation to show what modification you’re into,” Kouchis said “If you’re full repayment, you want something to show you’ve made your single payment and your loan has been reinstated.”

CFPB officials agree that communication and documentation are key.

“It’s important if you’re experiencing challenges as a homeowner to get your documents together, stay engaged and not fall into deeper trouble,” Brown said.

Essentially: it’s easier to be proactive and prevent problems from happening than to try to fix them after the fact.

Bottom line

The pandemic has thrown lots of mortgage holders into uncertain positions, and while forbearance offered many a degree of temporary relief, the payment pause was never going to last forever.

“This is a very stressful and often nerve-wracking experience,” Brown said.

To that end, it’s crucial for borrowers to be in touch with their lenders early and often about how their forbearance plan is structured, and to stay in touch as the protection ends. Especially for those who will still struggle to make payments, asking about options is key to avoiding bigger problems down the road.

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Written by
Zach Wichter
Mortgage reporter
Zach Wichter is a mortgage reporter at Bankrate. He previously worked on the Business desk at The New York Times where he won a Loeb Award for breaking news, and covered aviation for The Points Guy.