The CFPB’s new data on mortgage servicing during the pandemic shows the perils of ignoring the most vulnerable homeowners

When it comes to the housing marketplace, the stakes for Latino homeowners are particularly high, as equity from homeownership has been the primary component of accumulated wealth for Latino families. Unfortunately, there are now almost 700,000 mortgage holders in COVID-19 related forbearance plans. What’s worse, we have no clear idea on how many of these mortgage holders are Latino.

The COVID-19 related forbearance plans, authorized by Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March 2020, allow borrowers an opportunity to pause or reduce their mortgage payments for a limited time.[i] To be clear, the debt continues to grow over the term of the plan, and in most cases, the missed payments must be repaid at the end of the forbearance unless the borrower applies for and obtains a permanent modification or deferral.

As additional support for struggling homeowners, the Consumer Financial Protection Bureau (CFPB, or “the Bureau”), a federal watchdog for federal consumer protection laws, also created temporary guardrails to ensure borrowers facing foreclosures from the pandemic could be reviewed for loss mitigation options, which is an opportunity to work with their mortgage servicers to find a best course of action to minimize both the servicer’s and the borrower’s potential losses in case of foreclosure. Those guardrails expired on December 31, 2021.

To track how mortgage holders facing forbearance are faring, the CFPB asked 16 large mortgage servicers to provide specific data from May through December 2021. The Bureau tracked metrics on number of calls received at servicers’ call centers, call waiting times, forbearance enrollments and exits, and rates of delinquency. The CFPB also requested data about borrowers’ language preference and demographic information on race and ethnicity.

The CFPB published its results last month and buried in the report is a brief note explaining that “not all servicers collect or maintain data on a homeowner’s race or ethnicity and on language preference” in records.

This dramatically understates the situation. In fact, all 16 servicers reported that a significant number of loans listed the borrower’s race as “unknown.” This gap, alongside the “substantial lack of information about borrowers’ language preference and varying data quality,” meant that the CFPB found it “challenging to make any comparisons between servicers” and could not observe trends for homeowners of color, or for homeowners for whom English may not be their first language.

In short, gaps in the data leave the Bureau unable to track the success or difficulties of borrowers with limited-English proficiency (LEP) in accessing forbearance, nor could it measure how they fare after exiting forbearance. Are these LEP borrowers no longer in forbearance still behind on payments? Are they up to date on their mortgage? Neither the Bureau nor the public knows.

Limited data available points to the need for more in-depth data collection

The limited data we do have do not paint an encouraging picture. The Bureau notes that among the servicers who did provide data, both non-LEP borrowers and LEP borrowers showed a downward trend in total delinquencies between September and December. That is good news—but wait. The data also show that non-LEP borrowers had a far greater decline in total delinquencies.

What’s more, when we look at borrowers that remain in delinquent status, we see that the number of LEP borrowers who were delinquent without a loss mitigation option increased between November and December 2021 whereas the number for non-LEP borrowers decreased.

While the CFPB does not know how those LEP or homeowners of color and who are struggling to make mortgage payments are doing, the main findings from the Bureau’s report are concerning:

• The number and rate of delinquent exits from COVID-19 hardship forbearances increased during the reporting period, with 15% of loans exiting forbearance in a delinquent status and with no loss mitigation in place. Some servicers reported higher figures.
• Some servicers reported relatively high average hold times exceeding ten minutes and call abandonment rates higher than 30%. This means borrowers with these servicers are at a higher risk of never obtaining assistance from their servicer.
• The significant variances in data reporting from servicers regarding a borrowers’ race, ethnicity, and language preference does not allow for comparisons across the board.

Homeowners have not fully recovered from the ongoing COVID-19 pandemic, and many still face difficulties in accessing assistance. But we are unable to observe which groups of homeowners are facing the greatest hurdles.

The findings above show there is a stark need for more in-depth data collection by the Bureau to track the ability of homeowners of color and homeowners with limited-English proficiency to access critical homeownership retention venues, such as loss mitigation options and forbearance.

The Bureau can address the issue by continuing to pressure mortgage servicers to ask about language preference. It can also study servicers’ ability to prevent unnecessary foreclosures by tracking and reporting data on race, ethnicity, and language preference. Lastly, the Bureau can publicly signal the importance of language access, especially as it relates to fair lending. The agency has already acknowledged that failure to serve LEP borrowers could give rise to violations of federal consumer financial laws, like the Equal Credit Opportunity Act (ECOA).  The Bureau should drive home this message through its supervision and enforcement activities.

We must learn from experience, and use data to protect homeowners of color

An Urban Institute report from 2020 points to homeowners in neighborhoods of color and behind on their mortgage being less likely to be protected by forbearance than homeowners living in predominantly white neighborhoods. Unprotected homeowners who are delinquent in their loans and are unable to access forbearance can experience lower credit scores by almost 200 points than borrowers who are either in forbearance or up to date in their mortgage payments.

Yet the Bureau still does not have a way to reliably collect data on enrollment in COVID-19 hardship forbearance plans or access to loss mitigation options for the most vulnerable homeowners by race/ethnicity or language preference.

The importance of data availability cannot be understated. Timely data from the government can provide the public, including housing advocates, with greater opportunities to spot troubles in access to loss mitigation or forbearance options and to address challenges before it is too late.

Data can also help us point to what is working in the forbearance process and deploy more targeted implementation. Inclusion of demographic and language-preference data can shed light on how the most potentially vulnerable homeowners of color are faring in today’s economy.

Although private institutions and federal agencies (including the CFPB) do collect data on forbearance rates, the data on forbearance rates for LEP and homeowners of color are extremely limited. As a result, we are woefully unprepared to make any timely or accurate inferences on how to ensure every homeowner has an opportunity to apply and participate in forbearance plans and to avoid falling behind.

Previous experiences like the foreclosure crisis of 2008, in which the devastating wealth loss was disproportionately borne by homeowners of color, point to the danger of ignoring the most vulnerable homeowners in times of recession or economic instability. We must heed lessons learned from the past and target efforts, including data collection, to ensure that homeowners of color and homeowners with limited-English proficiency are afforded the opportunity to stay in their homes in times of economic crisis.

 

Susana Barragán,Policy Analyst,Economic Policy Project, UnidosUS