The complexity of loss mitigation programs designed to assist distressed mortgage borrowers during the COVID-19 pandemic may have been too daunting for many borrowers to seek help, the CFPB said, in a report released last week.

“Many respondents faced challenges accessing these programs even among those who reported communicating with their servicer,” the CFPB said. “Our findings suggest that the complexity of processes for receiving help with payment difficulties may have created barriers to accessing loss mitigation for some borrowers, and these barriers may have been relatively higher for distressed borrowers.”

The agency used data from the 2020 American Survey of Mortgage Borrowers to analyze distressed borrower experiences. The bureau analyzed a sample of 1,740 respondents, covering the time period of October 2020 to February 2021.

The report highlighted the following primary findings:

• Respondents most commonly reported difficulty accessing loss mitigation programs. Respondents stated they did not think they qualified for certain options, or did not know how to apply for programs.
• More than 1 in 5 distressed borrowers reported speaking a language other than English at home.
• Around 1 in 15 reported both speaking a language other than English at home, and speaking English less than very well.
• Among distressed respondents who enrolled in forbearance plans, more than one-third were unsure of what would happen at the end of the forbearance plan, and how they would repay suspended payments.

In analyzing problems reported by distressed borrowers, the CFPB reported that:

• 47.9% said they did not think they qualified for any program.
• 46.1% said they did not know how or where to apply for programs.
• 24.5% reported that the application process was too much trouble.
• Various other problems were reported at lower percentages.
• For distressed borrowers with limited English proficiency, the report stated:
• More than 41% of respondents stated that the application process for programs was too much trouble.
• These borrowers were more likely to experience challenges described as “lender/servicer was unable or unwilling to help me,” “not knowing how to apply for programs,” “turned down for the programs I applied to,” “did not think I qualified for any program,” and “did not feel comfortable talking with the lender/servicer representative.”
• The report also analyzed the experiences of borrowers in two categories: (1) those who had direct discussions with their servicers about concerns or difficulties, and (2) those who had concerns or difficulties but did not have any direct discussion with their servicers. This section of the report offered inconsistent results in terms of borrower satisfaction. However, the report did conclude that borrowers who directly communicated with their servicers about payment difficulties received more loss mitigation offers than those who did not.
• On the topic of forbearances, the CFPB reported generally positive feedback on borrower satisfaction, but noted certain areas for improvement. The findings included:
• Almost 60% of the borrowers who received forbearances said they were very satisfied with the process.
• More than one-third of the respondents who received forbearance were unclear about what would happen at the end of the period and how to repay suspended payments when the period ended.
• Overall, the CFPB said the results show that many distressed borrowers had trouble applying for loss mitigation programs during COVID-19. However, those who did succeed, and those who communicated directly with their servicers, were more likely to be satisfied with the results.
• We note that the timing of this report indicates it is intended as further justification for the CFPB’s proposed rule (which was just issued on July 10^th) to amend the Regulation X mortgage servicing rules. The Bureau’s stated purpose for the proposed rule is to streamline and improve the loss mitigation process, in light of lessons learned during the COVID-19 pandemic.

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