In mid-March, the monitor for the National Mortgage Settlement announced that participating banks had completed terms of the agreement affecting 49 states. Bank of America, Citigroup, JP Morgan Chase and Wells Fargo collectively provided more than $20 billion in borrower relief to more than 600,000 troubled homeowners.
Of this money, at least $10 billion was used to reduce principal owed on homes with market values lower than their mortgages and others that were either delinquent or at-risk of default. Another $3 billion benefited borrowers who were able to refinance their homes at lower interest rates than their original mortgages. The remaining $7 billion assisted a variety of programs from service members who were forced to sell their homes at a loss, to anti-blight efforts, short sales and transitional assistance.
Despite these positive steps, the housing crisis is still not over for far too many households. New data released by the Consumer Financial Protection Bureau (CFPB) reveals that mortgages remain the number one complaint category for the second consecutive year. In 2013, mortgage complaints filed with CFPB grew to 60,000, up from 19,250 complaints the previous year.
CFPB Director Richard Cordray said, "At a market level, complaints give us insight into what is happening to consumers across the country, right now. They are also our compass and make a difference by informing our work and helping us identify and prioritize problems for potential supervisory, enforcement and regulatory action."
When CFPB analyzed consumers’ mortgage concerns, loan modification, collections and foreclosures accounted for nearly 60 percent of those received. Other mortgage complaints included loan servicing, payments, escrow accounts, mortgage brokers and origination.
The irony of the continuing mortgage saga is that the national settlement called for new servicing standards that would correct the kinds of conduct that harmed consumers in recent years. The settlement also included explicit servicing requirements to remedy key problem areas:
- Providing a single point of contact for borrows to call when seeking information about their loans and adequate staff to handle calls;
- Requiring servicers to evaluate all available option to homeowners before beginning foreclosures;
- Stopping past consumer abuses such as lost paperwork and improper documentation; servicers were to end the practice of robo-signing foreclosures and instead ensure a full review prior to those filings; and
- Restricting banks from foreclosing while the homeowner is being considered for loan modifications that would make mortgage payments more affordable.
CFPB’s complaints highlight a harsh reality of our country’s economy. Its findings can and should serve as a bellwether for continued policy reforms that address yet unmet needs.
However while CFPB can tally its complaints, the anguish that homeowners continue to suffer cannot be calculated. The American dream of homeownership became a nightmare during the housing crisis and continues to be so for large numbers of homeowners. It is also relevant to note that for many troubled borrowers, the decision to purchase a home remains the single largest investment of their lifetimes.
Since the financial crisis that began in September 2008, approximately 4.9 million homes were lost to foreclosures as of January this year. Another 1.9 million mortgages were in serious delinquency, 90 days or more past due. These data points were tallied by CoreLogic, a firm specializing in financial analysis.
The 600,000 homeowners helped by the national settlement began important remedies to the crisis. And it is still too soon to measure the effectiveness of CFPB’s new mortgage rules that took effect in January.
It is therefore clear that more important work remains before America’s housing market returns to full health. Communities of color that were targeted for predatory mortgage loans have endured the brunt of foreclosures and lost wealth. Even for neighbors who remain in their homes and are current on their mortgages, reduced property values affect their home investments as well.
No community – especially those that were financially preyed upon – should be left out of the nation’s recovery.