Over the last two years, there has been a sharp increase in the average monthly reverse mortgage complaints, according to the 2022 Consumer Response Annual Report, highlighted this week by the Consumer Financial Protection Bureau (CFPB). And, most of these complaints have centered around issues related to loan statements and making payments.
While the rate of reverse mortgage-related complaints has fluctuated over the past few years, the recent increase could indicate issues with the industry’s servicing side. However, there have also been notable changes to the servicing side, which could be responsible for some of the report’s findings, according to a reverse mortgage industry educator.
Reverse mortgage findings
Mortgage complaint data is divided between different types of products, including conventional home mortgages, Federal Housing Administration (FHA) mortgages, home equity loans or line of credits (HELOC), reverse mortgages, Veterans Administration (VA) mortgages, and “other types of mortgages,” according to the report.
“Overall, mortgage complaint volume decreased in 2022,” the report states. “On average, companies responded to more than 1,900 mortgage complaints per month (compared to a monthly average of 2,100 complaints for the prior two years).”
When looking at reverse mortgages specifically, the trend for complaints was in direct opposition to the mortgage industry at large.
“The monthly average for reverse mortgage complaints increased 33% compared to the monthly average for the prior two years,” the report states. “The monthly average for FHA mortgage complaints increased 7% compared to the monthly average for the prior two years.”
The reverse mortgage complaints submitted to the CFPB have focused primarily on statements and payments, the report states.
“In their complaints about reverse mortgages, consumers often express frustration in either getting statements or a payoff amount from their lender, or state that they are having difficulties making a payment or paying off a mortgage,” the report notes. “In their responses, companies will sometimes apologize for the delay and provide the requested information. In other responses, companies will request follow up information from consumers.”
Servicing changes
Because the complaint data is focused on payments, the complaints seem to stem from servicing, according to Dan Hultquist, industry educator and author of Understanding Reverse.
“As we know, a large portion, I would say the majority of the complaints [come from] as I read them, are issues on the servicing side,” Hultquist said. “And it would make sense that 2022 had a disproportionate amount of complaints on the servicing side because of the bankruptcy of Reverse Mortgage Funding as well as the transfer of multiple servicing portfolios to different servicers.”
In addition to the bankruptcy, some lenders engaged in new subservicing agreements. PHH Mortgage Corp entered into a new subservicing agreement with Finance of America Reverse (FAR) earlier this year, but there was also a change in servicing on the side of the U.S. Department of Housing and Urban Development (HUD).
“I would say that also the change from NOVAD that occurred during the calendar year, while disruptive, should result in better servicing performance in the future,” he said.
The HUD Home Equity Conversion Mortgage (HECM) servicing contract shifted from NOVAD to Celink at the end of last year, an arrangement that, as HUD officials pointed out, is continuing to be embedded in the servicing infrastructure.
Hultquist did observe an encouraging sign when reviewing the reverse mortgage complaint data himself, he explained.
“The one thing unique about the reverse data is that nearly every one of them was closed with an explanation,” he said. “That’s typical of our industry because we often deal with heirs who don’t understand what the product is or how it’s used. That’s the first thing I picked up on because I’m in the education world. It’s very important for people to understand, so I find this encouraging that every one of them was closed with an explanation.”
Prior complaint data
Reverse mortgage complaints recorded by the CFPB waxed and waned during the pandemic. Early on, reverse mortgage-related consumer complaints slowed, but appeared to accelerate in early 2022.
However, reverse mortgage complaints are a small share of the total consumer complaints received by the CFPB. According to 2021 complaint data, reverse mortgage complaints made up less than 1% of the total share that year.
