On August 10, 2021, the CFPB’s Office of Supervision Policy published a report titled Mortgage Servicing COVID-19 Pandemic Response Metrics: Observations from Data Reported by Sixteen Servicers (“Servicing Metrics Report”). Although the Servicing Metrics Report doesn’t allege any compliance deficiencies in the servicers’ performance, the topics addressed in the report and the CFPB’s accompanying press release indicate areas of focus for the CFPB, and servicers should take note.
The forbearances mandated by the CARES Act are ending, and mortgage servicers will be under greater pressure to make long-term arrangements to resolve borrowers’ remaining delinquencies when they exit forbearance. This effort will involve increased interaction between servicers and borrowers, including evaluation of additional loss mitigation options, such as repayment plans, payment deferrals, modifications, short sales and other foreclosure alternatives. The CFPB has previously stated that COVID-19 relief practices are a supervisory and enforcement priority, and has used its new “Prioritized Assessments” to review servicers’ compliance on an accelerated basis. Servicers can reasonably expect similar attention to the processes for final resolution of loan forbearances.
To be clear, the Servicing Metrics Report is not an express statement of CFPB policy or enforcement priorities. On its face, it is merely what it says it is – a report summarizing data provided by sixteen unidentified large servicers, describing a selected set of performance metrics over the limited period of December 2020 through April 2021. In its selection of data to report, however, there are some implicit suggestions that the CFPB has concerns in certain areas, and perhaps even with certain servicers or subservicers. The CFPB’s press release makes this clear, including a statement by its Acting Director Dave Uejio that the report, “should inform servicers’ own data reviews as they determine whether they are doing enough for borrowers.”
The Servicing Metrics Report covers a number of areas, but a few are of more interest than others, specifically:
- Call metrics, including volume of customer calls, average speed to answer calls, call abandonment rates and average call handling times.
- Delinquency at the time of COVID-19 forbearance exits, as an indicator of final loss mitigation resolution.
- Delinquent borrowers who never requested forbearances.
- Limited English proficiency (“LEP”) and race data regarding borrowers.
It’s not difficult to see how these could be translated into enforcement priorities. Poor call metrics may indicate inadequate staffing to handle borrower demand for permanent loss mitigation options. A large number of delinquencies upon exit from forbearances may mean that borrowers have not been afforded all loss mitigation options. The existence of delinquent borrowers that never requested forbearances may suggest that a servicer didn’t engage in active outreach to borrowers to offer the option. The failure to collect and maintain LEP and race data may indicate that a servicer does not take necessary efforts to ensure fair lending compliance.
The Servicing Metrics Report also calls attention to a few specific data points that imply focused concern on certain topics. Moreover, in calling attention to the differences in performance among the servicers in the report, the CFPB signals that there is a range of acceptable and unacceptable metrics. For example, the report notes that:
- Two bank servicers had unusually slow average call answer times, peaking at around 26 minutes and 19 minutes respectively, while other servicers reported monthly average call answer times as low as 1, 7 and 12 seconds.
- One of those bank servicers with slow call answer times and two non-bank servicers reported relatively high call abandonment rates, peaking at 34% and 22% respectively, while most others reported average abandonment rates of less than 5%.
- Although delinquency rates varied significantly among servicers, three servicers, all of which used the same subservicer, showed materially higher delinquency rates on exits from forbearances, in excess of 50%.
- Some servicers showed higher than average rates of delinquent borrowers who never got a forbearance (although the report also notes this situation was concentrated in private investor loans that may not have been covered by legal or investor mandates to provide forbearances).
- Nearly half of the servicers don’t collect information on whether borrowers have limited English proficiency.
- Four servicers indicated they don’t collect or maintain race information, although it was unclear whether they generate proxy analysis to conduct fair lending statistical or other compliance reviews.
Indeed, while the Servicing Metrics Report doesn’t expressly state that any of the above constitute (or do not constitute) a failure to comply with regulatory requirements, it makes some suggestions for improvement. With respect to the call metrics, the report states that the longer time to answer calls “may indicate an opportunity” for improvement “by assigning additional staff and resources to address higher inquiry volume.” With respect to LEP and race data, the report says, “[t]o avoid the risk of harm to vulnerable populations, the CFPB encourages servicers to evaluate the fair lending risk related to servicing borrowers with LEP and ensure that their fair lending [compliance system] is sufficiently equipped to identify and address the attendant risk.” In case servicers miss the implications of those statements, another quote of Acting Director Uejio from the CFPB’s press release makes the point more directly: “Servicers who find themselves at the bottom of the pack should immediately take corrective steps. The CFPB will hold accountable those servicers who cause harm to homeowners and families.”
In short, mortgage servicers should take note of the information and implications included in the Servicing Metrics Report and accompanying press release. Although the report is styled as a set of observations regarding practices by a limited number of servicers over a limited period of time, the broader warning is clear. The CFPB has its eyes on these issues, and may have more to say as this period of COVID-19 relief ends.