Even streamlined pandemic forbearance confused some: CFPB

The Consumer Financial Protection Bureau has released a review of pandemic servicing intervention that suggests despite steps taken to make it broadly accessible, distressed borrowers reported a degree of difficulty with the entry to and exits from it.

Nearly 50% had questions about whether they were able to use forbearance intended to be broadly offered to borrowers with hardships related to COVID-19, largely upon request.

Even with that streamlining, more than a third were unclear on how to settle up later, and over one-fourth found the overall process too daunting.

The report also found that not only were one in 15 borrowers limited English proficient, more than 20% were multilingual.

The findings are in line with the fact that a relatively large share of borrowers who are multilingual is something that's drawing focus on the federal policy front and the market at large.

"As the number of borrowers and consumers across the country increasingly speak other languages, the need to serve them, in line with that, increases," said Joshua Weinberg, president of Firstline Compliance, in an interview earlier this year.

Pandemic experiences might provide clues to ways regulators may be rethinking language guidance in servicing. 

"There were a lot of issues with people exiting forbearance. I think having that volume from COVID gave us data, and that is part of the timing of why servicing language guidance is likely now," said Melissa Kozicki, director of compliance at Mortgage Cadence, in the same interview.

The CFPB isn't the only public agency focused on language. The Federal Housing Administration in May as part of updates that also included some new fee reimbursement guidance for assumptions, added some new language policies for companies transferring servicing rights.

In addition, many states already have language requirements on the books that servicers should be following.

Over 30 states have either limited English proficiency laws, or what are called unconscionability standards, according to George Baker, CEO and founder of Talk'uments, a provider of digital language technology for English, Spanish, Chinese, Korean, Vietnamese and Tagalog-speaking borrowers.

"An unconscionability standard is having someone sign an agreement knowing full well that they cannot understand the words, the purpose or the intent of the agreement. That's an unconscionable act and a huge debt violation," Baker said in a recent interview.

The CFPB's data on pandemic servicing and related language demographics is based on information from the 2020 American Survey of Mortgage Borrowers, a subset of the National Mortgage Database. Some of the confusion borrowers registered might be due to the emergency nature of the program early on as policy for it was still in flux.

Other data the active bureau also released recently included another subset of the NMD reflecting three questions asked in 2021, which found a 70% consumer satisfaction rate for appraisals. Another 23% were "somewhat satisfied. Just 6% were unsatisfied.

In evidence of the early days of the so-called lock-in effect, 50% of respondents were uninterested in moving, with 25% "willing and able" to, 20% unsure and 5% "willing but unable."

The CFPB makes particular note of the fact that 8% of borrowers that year considered "accommodations for people with disabilities" a key factor in choosing a home, suggesting this is another area the bureau may be focusing on as it considers policy.

In the past week, the bureau also reported that fair-lending enforcement actions are at a record high, addressed how artificial intelligence interacts with fairness rules, and warned institutions to provide accurate Home Mortgage Disclosure Act reporting.