Reverse Mortgage Complaints to CFPB Accelerate During Pandemic
The number of consumer complaints to the Consumer Financial Protection Bureau (CFPB) regarding the reverse mortgage product category appears to have accelerated since the start of the national emergency resulting from the COVID-19 coronavirus pandemic, RMD has learned. .
That’s according to an analysis by the CFPB’s Consumer Complaints Database for data collected by the agency between March 2020 and January 2022. While the average monthly complaint rate for CFPB reverse mortgages at the Although the pandemic era is even weaker compared to the pre-COVID-19 period, the pace has noticeably accelerated very recently, between November 2021 and January 2022.
Number of Reverse Mortgage Complaints
According to the recently updated CFPB Consumer Complaints Database, a total of 618 consumer complaints regarding reverse mortgages have been submitted to the CFPB since March 2020, the month President Donald Trump declared a national emergency in due to the pandemic. In the fully recorded period between August 2017 and January 2022, a total of 1,551 reverse mortgage complaints were recorded by the agency.
Between August 2017 and February 2020 – a month before the declaration of a pandemic by the World Health Organization (WHO) and a national emergency by the Trump White House – the number of reverse mortgage complaints received by the CFPB averaged around 30 complaints per month. Since the start of the pandemic in March 2020, this monthly average over the majority of the pandemic period has dropped slightly to 26.9 per month. The three-month average over the period between October 2021 and January 2022 is much higher at 43.
During the pandemic period, the single month with the highest number of reverse mortgage complaints was November 2021, which saw 51 complaints recorded by the CFPB.
The nature of the complaints varied, but by far the biggest reason consumers offered complaints about reverse mortgages stemmed from “problems during the payment process,” according to the data. Nearly 45% of complaints registered during the pandemic period attributed this as the reason for the complaints filed. “Difficulty paying” was the second most common reason, with 19% of complaints stemming from this issue.
Since the onset of COVID-19, the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) have sought to make a series of sweeping additions to provide relief to reverse mortgage borrowers and expand the loss mitigation options. Some of the pandemic relief since 2020 has included allowing both external and computer-based evaluations, instruct to delay reverse mortgage applications due during the national emergency, delaying foreclosures and evictions and allowing the electronic submission of HECM workbooks.
With the transition to the Joe Biden administration in 2021, many of these initiatives have continued. The White House has called for additional funding for housing, and the passage of the American Rescue Plan Act last year paved the way for some relief that reverse mortgage borrowers can enjoy.
Other reasons reverse mortgage complaints were submitted included “applying for a mortgage or refinancing an existing mortgage” (18.6%) and “entering into a mortgage” (17.5%). Only one complaint during the pandemic period was attributed to an inability to obtain a credit report or score.
Reverse Mortgage Complaint Locations, Company Response Rates
By far, the state with the most reverse mortgage complaints submitted to the CFPB was California, with 110 complaints (or 17.8% of the total). This is not particularly surprising, since California is by far the most active reverse mortgage state in the country. Nine of the top 10 reverse mortgage lenders in 2021 all list California as their most active state.
Florida came in second, with 81 reverse mortgage complaints (13.1% of the total) submitted to the CFPB during the same period. It is followed by Texas (58); New York (29); and Arizona (19) rounding out the top 5, with similar correlations to general industry lending activity.
In terms of a company’s response to the complaining consumer, all 618 complaints listed are taken into account, with the vast majority – 595 – being listed as “closed with explanation”. Six of the complaints were still pending as of February 16. Interestingly, only 133 of the complaints (21.5% of the total) received a direct-to-consumer response from the company, with the majority of these cases seeing the company choose not to make that response publicly available in a database. CFPB data.
Early in the pandemic, reverse mortgage originators across the country saw a noticeable, albeit anecdotal, increase peak of interest among seniors who had begun to seek new financial tools in response to market volatility stemming from the early days of the pandemic. While the market would continue to largely recover for much of this period, general interest in reverse mortgages continued to fuel loan production.
In 2020, the FHA reported that the reverse mortgage portion of the Mutual Mortgage Insurance Fund (MMI) had improved, although it was still operating in negative territory. The following year, the reverse mortgage program hit positive territory for the first time since 2015, fueled in large part by higher rates of home price appreciation and lower interest rates.
However, much of the pandemic-era reverse mortgage production comes from existing customers refinancing into a new reverse mortgage. This has led industry analysts to worry about unsustainable revenue growth. Nonetheless, reverse mortgage business in 2022 appears to be off to a good start based on approval data.
After making a first to promise to improve the ability of consumers and other stakeholders to use the CFPB complaints database in new ways during the summer of 2019, the Bureau implemented its database updates in July 2020 with new visualization options.
Visit the CFPB database of consumer complaints.