Draft Summary of Discussion

By the Regulation Room team

For Borrowers in Trouble: Reliable Contact with People Who Can Help

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§1. What’s going on here?

This is a summary of discussion on the “For Borrowers in Trouble: Reliable Contact with People Who Can Help” post from August 10 to October 3, 2012. (On that date, the post was closed to further discussion.) It was written by the Regulation Room team. This version is a DRAFT. Please help make sure that nothing is missing, wrong, or unclear. You can propose changes to this version until October 8.

The goal is to give CFPB the best possible picture of the different views, concerns, and ideas that came out during the discussion. This is NOT the place to reargue your position or criticize a different one. Focus on whether anything is missing or unclear, not whether you agree or disagree.

On October 9, the Final Summary will be posted on Regulation Room and submitted to CFPB as a formal comment in the official rulemaking record. (October 9 is the last day of the official commenting period.)

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§2.Stories of consumer frustration

Most of the comment on this proposal was from consumers recounting their frustrating personal experiences:

“Hearing someone tell you over the phone that they can’t find a document that you delivered over and over again is about the most frustrating and alienating and helpless shady experience I had while trying to short sale my home. My continual [and] repeated efforts where futile and inefficient.” (Consumer with personal or family experience with foreclosure in a household making less than $100,000/year)

“If someone were available consistently and knew what to do and how to help, it would relieve stress, mental anguish and perhaps solve the problem before needing other intervention… I can’t tell you, but have documented the almost daily calls that require me to repeat the same information then am told that someone else from another department will be in touch because the caller is not the right office… Continuity of contact is a good start.” (Consumer who themselves, or someone in their family, had a hard time making mortgage payments; household making less than $100,000/year)

“I’ve been working with my mortgage loan servicer for 9 months now trying to get a modification. I’ve had 4 different customer relationship managers and have always gotten voice mail every time I called. Occasionally I would get a call back but usually not. And why do they not accept documents electronically? I have faxed and “fed-exed” my documents numerous times and each time they claim they did not receive them, even though I have fax confirmations and tracked the Fed-ex package to make sure it was delivered. I am completely frustrated with the whole process.” (Consumer who themselves, or someone in their family, had a hard time making mortgage payments; household making less than $100,000/year)

“I have had over 8 different contact people with my mortgage company in the past 9 months. And these were just the people I dealt with after my application was escalated to the president’s office. The only answer I would get was that my modification was still in review. The last conversation with them was 8/31/12 when they said it was still under review. I just received a letter from my mortgage company stating that my loan was sent to a servicing company and that I would have to deal with them directly with my modification. 9 months of stall tactics and waiting for a response. I gave them all the information they needed but they didn’t act on it. Now I will have to begin the whole procedure all over again with another company. That is if they don’t just foreclose on me.” (Consumer who themselves, or someone in their family, had a hard time making mortgage payments; household making less than $100,000/year)

Sometimes, commenters’ experience revealed how customer service problems can become hopelessly intertwined with questions about substantive availability of a loan modification option:

“I have been trying to get my payments lowered and keep sending and resending paperwork now I have been informed that there is nothing that can be done. My partner had to borrow against her 401K plan in order to get our mortgage caught up; now we have been informed that our payment will be increased from 2016.26 to 2510….” When the moderator asked whether it was “problems with the customer service not receiving your paperwork that led to the decision to not lower your payment” the commenter responded: “The problem with paperwork was that they never told us what we were supposed to sign and they made us send everything in at least 4 times. Then when we got it all sent in they informed us that they did not hold the mortgage but it was held by another holding company. Then they said that they were allowed to have the mortgage set at approximately 31% of our income and they are supposedly lower than that so there was nothing they could or would do. They kept giving us a run around and playing telephone tag. But they would not call back when you called them. It just seems that since we make about $90,000 a year we are just stuck with the payments since we want to keep the house.” (Consumer who themselves, or someone in their family, had a hard time making mortgage payments; household making less than $100,000/year)

“[M]y husband and I … had multiple circumstances causing financial issues, we request a loan mod. and the lender and attorney we hired said the lender will not even begin to negotiate with us until we were behind on our mortgage, something we were not. Long story short, … I am 1 year out of short sale and started the whole this in 2007 and due to all the non-contact and screwups we just finalized it Sept, 2011. …. I have stacks of documents showing they lost my paperwork; some comments are: they cannot find it; then, it’s been given to collections, which there was no reason for that; then every other time they would misplace ‘lose’ my documents, then switch people and they lose it. I have the conversations where the realtor and the rep at the bank tell each other they lost my stuff; also the documentation and notes from the attorney [where] they marked down …times that there is a hold up due to misplaced papers…” (Consumer who self-identified as “was in the early stage of a financial crisis and all in all ended with short sale”)

In other instances, it appears that inability to communicate with knowledgeable personnel and problems with lost documents aggravated a situation where the borrower simply didn’t qualify for a modification that improved his/her situation:

“We also cannot get the mortgage co. to assist us in any way. We were late in the past due to a significant medical event. The bank nearly foreclosed, then modified, raising our payment. We are now underwater. And the payment is so large, we can barely pay our other creditors. We can’t move, because we can’t pay the deficiency balance on the house in our state of MD. All we are told by the bank is there is nothing available to help us. My spouse, who had the medical issue, is working himself to death to meet the obligation. It’s a horrible situation, at 6.25% interest!” (Consumer who themselves, or someone in their family, had a hard time making mortgage payments.)

In addition to stories of frustration, commenters did make some specific suggestions.

§3. Online document submission and tracking

Two consumer commenters and one commenter who works for nonprofit credit counseling organization urged CFPB to require servicers to provide borrowers with a checklist of documents that are required to apply for the servicer’s loss mitigation options, and to create an electronic interface where borrowers can upload documents and track due dates, documents received, and documents outstanding.

One consumer emphasized the value of enabling the borrower “to see the same documents that the servicer can see” and explained: “Hearing someone tell you over the phones that they can’t find a document that you delivered over and over again is about the most frustrating and alienating and helpless shady experience I had while trying to short sale me home. My continual [and] repeated efforts were futile and inefficient.” The other explained: “Right now I am at the mercy of the customer relations manager. It’s a ‘he said-she said’ battle because I have sent documents, but they say they didn’t get them. Even though I have fax confirmations and fed-ex tracking numbers that show delivery, I can’t prove what documents were delivered.”

The credit counseling commenter pointed out that a system currently exists “by which housing counselors can upload documents electronically to many of the major servicers” and that “GMAC Mortgage has just started allowing homeowners to upload their own docs. See the website: http://www.homeownerconnect.org.”

§4. Streamlining the process for communication between servicer and consumer

Another commenter affiliated with credit counseling advocacy group emphasized that not only does the assigned single point of contact “need[] to be cross-trained to provide real and accurate answers,” but also communication to the consumer from other sources has to be controlled:

“[O]ften times even though a SPOC [single point of contact] exists, other account reps from various departments at the same servicer (or affiliated attorney) continue to contact or send letters to the client which confuses them as to which documents have been received, what needs to be provided, and what the status is. For example, a client was approved for a trial mod but after signing and returning her documents, she received a notice from another department stating that she needed to provide documents for an approval. Then when she called that department the account manager said they didn’t receive the documents that she had signed and overnighted to them, and had no notes regarding the approval. At that time I told her to contact her SPOC (which had changed again) and verify that everything had been received and approved… it had. It was an internal error which caused more stress on the client, and I have witnessed it happening many times to many clients.”

This commenter suggested that servicers be required to make the SPOC the single channel for all communications with clients (and the housing counselors helping them).

§5. Contact with underwriters

This same commenter also emphasized the importance of the SPOC having “direct contact with underwriters (in order to eliminate rejections based on correctable errors or missing information).” S/he went further to suggest: “It would be ideal if housing counselors were able to have direct communication with underwriters and eliminate the third person in between which would also be more cost effective due to a reduction in communication problems, time, and the amount of re-dos because of inaccurate rejection issues.”

When the moderator asked about whether direct access to underwriters might overwhelm the servicers and further delay modification requests, this commenter responded:

“I am concerned about underwriters being overwhelmed by calls from clients and understand how difficult it is to constantly be interrupted while trying to review detailed information. However, the reps also interrupt the underwriters to find out information for clients and counselors so it wastes time adding a 3rd person to the mix when the information at hand is critical to the decision making process. I don’t think the average turn around time for evaluation decisions is accurate. Because of the barrier in communication, many clients are being denied due to forgetting to fill something in or check a box when the underwriter could simply call and say, ‘can you check the box and fax it back in to me, or can you explain… or send me xyz document?’ so they are able to accurately complete the evaluation. Instead, clients must re-apply from the beginning which wastes time that could be spent on new client applications, and prolongs the foreclosure process. My suggestion would be for clients to have a SPOC for both inbound and outbound communication, and for the housing counselors to have direct contact with underwriters with the understanding that housing counselors will be contacted for any needed information or decisions before client files are closed in order to avoid declines based upon missing information, misunderstandings, or the reasons stated previously.”

The moderator pressed the commenter, asking whether “lenders [would] be concerned that, by flagging open items, an underwriter might compromise the independence of the review process, even if inadvertently? How would the underwriter be comfortable, for example, that a borrower isn’t checking a box to get approval when, in fact, the original application was more accurate? As an alternative, would it make sense for housing counselors to review materials for accuracy and completeness (i.e., check the box, if appropriate) before submission?” The commenter drew on his/her experience in responding:

“I understand the lender/servicer’s fears that the integrity or independence of a review may be compromised by the coaching of clients by their underwriters; however, … I doubt it would be an issue as the underwriters are working for the servicers, not the clients; so underwriters would have no incentive to coach clients. What I was implying was for underwriters to follow up and ask questions or confirm obvious small mistakes that are made before simply denying a modification. Yes, in a perfect world housing counselors would catch all errors, but aside from the fact that we are also human and miss things from time to time ourselves, and that every servicer has slightly different requirements; often times clients submit paperwork before seeking the aid of a housing counselor so we are coming in during the middle of the process. Examples of avoidable denials based upon obvious errors which could have been corrected: A client was denied due to an obvious miscalculation in the expense column of her RMA; another client was denied because although she wrote a detailed explanation of her hardship, she did not check the hardship box.”

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