Mortgage Forbearances Cause Consumer Angst, CFPB Says

Young woman covering her face with surgical mask and using smartphone to find information about coronavirus spread on internet

Homeowners in financial distress amid the pandemic are facing delays, denials, and a lack of communication from financial institutions, according to a new report from the Consumer Financial Protection Bureau (CFPB).

Consumers submitted more mortgage-related complaints this March than in any month since April 2018, according to the CFPB, the government agency that enforces consumer financial laws. In fact, the number of complaints mentioning forbearance and related terms has reached its highest monthly average since March and April of last year, the CFPB said.

When the pandemic hit, the government as well as private lenders created forbearance programs that allowed homeowners to skip their mortgage payments if they were experiencing financial hardship. For example, homeowners whose loans are backed by Fannie Mae and Freddie Mac—about 70% of all U.S. homeowners—were given the option to enter forbearance and stay there for up to 18 months, adding the skipped payments on to the end of their loans. 

That’s in addition to a foreclosure ban that’s in effect through June. The CFPB has proposed regulations designed to avert a foreclosure wave once these protections expire. But the agency’s report suggests consumers sometimes face difficulties taking advantage of these protections.

Customers frequently complained that mortgage servicers—the companies that manage mortgages and send statements—did not clearly explain the relief options available when forbearance ended. Others said they experienced delays or got conflicting information when discussing loan modification options before ultimately being denied. Still others had difficulty reaching someone to talk to in the first place, among other issues.

A CFPB analysis released alongside the report on complaints showed that forbearance issues affect minority homeowners more so than White borrowers, with a greater share of Black and Hispanic homeowners in forbearance.

Among Black homeowners, 9.2% are in forbearance, compared to 3.7% of their White counterparts, according to a CFPB analysis of mortgage data released Tuesday. The report, relying on a sample of nationwide data from March , showed that 4.7% of home loans overall remained in forbearance. 

“More borrowers are behind on their mortgage than at any time since the height of the Great Recession,” said CFPB Acting Director Dave Uejio in a statement. “Communities of color have been hit hard by the pandemic, and the latest data show that many borrowers are still hurting.”