The amount of consumer complaints to the Consumer Financial Protection Bureau (CFPB) related to the reverse mortgage product category appear to have accelerated since the beginning of the national emergency stemming from the COVID-19 coronavirus pandemic, RMD has learned.
This is according to an analysis of the CFPB Consumer Complaint Database for data collected by the agency between March, 2020 and January, 2022. While the average monthly rate of pandemic-era CFPB reverse mortgage complaints is still lower when compared with the period prior to COVID-19, the rate has noticeably accelerated very recently, between November 2021 and January 2022.
Number of reverse mortgage complaints
According to the recently-updated CFPB Consumer Complaint Database, a total of 618 consumer complaints about reverse mortgages have been submitted to the CFPB since March of 2020, the month that President Donald Trump declared a national emergency due to the pandemic. In the fully recorded period between August of 2017 and January 2022, a total of 1,551 reverse mortgage complaints have been recorded by the agency.
Between August 2017 and February 2020 — one month prior to 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 out to roughly 30 complaints per month. Since the onset of the pandemic in March 2020, that monthly average over the majority of the pandemic period has slightly lowered 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 far and away the biggest reason consumers offered complaints about reverse mortgages stemmed from “trouble during the payment process,” according to the data. Nearly 45% of complaints recorded during the pandemic period attributed this as the reason for submitted complaints. “Struggling to pay” was the next 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 aimed to make a series of sweeping additions to provide for reverse mortgage borrower relief and expanded loss mitigation options. Some of the pandemic relief since 2020 has included allowing both exterior-only and desktop-only appraisals, instructing servicers to delay reverse mortgage due-and-payable requests during the national emergency, delaying foreclosures and evictions and allowing the electronic submission of HECM case binders.
With the transition to the Joe Biden administration in 2021, many of those initiatives have been maintained. The White House has requested additional funding for housing, and the passage of the American Rescue Plan Act last year has provided an avenue for some relief that reverse mortgage borrowers can take advantage of.
Other reasons for submitted reverse mortgage complaints include “applying for a mortgage or refinancing an existing mortgage” (18.6%) and “closing on a mortgage” (17.5%). A single complaint during the pandemic period was attributed to an inability to get a credit report or score.
Locations of reverse mortgage complaints, company response rates
By far, the state with the highest number of reverse mortgage-related complaints submitted to the CFPB was California, totaling 110 complaints (or 17.8% of the total). This is not particularly surprising, since California is far and away the most active reverse mortgage state in the country. Nine of the top 10 reverse mortgage lenders in 2021 all feature California as their most active state.
Florida came in second, with 81 reverse mortgage-related complaints (or 13.1% of the total) submitted to the CFPB in the same period. This is followed by Texas (58); New York (29); and Arizona (19) rounding out the top 5, with similar correlations to general loan activity for the industry.
In terms of a company’s response to the complaining consumer, all 618 listed complaints are accounted for with the vast majority — 595 — being listed as “closed with explanation.” Six of the complaints remain in process as of February 16. Interestingly, only 133 of the complaints (21.5% of the total) have received a direct response to the consumer by the company, with the majority of those instances seeing the company elect not to make that response publicly available in a CFPB database.
At the onset of the pandemic, reverse mortgage loan originators across the country recorded a notable, though anecdotal spike in interest among seniors who had begun looking for new financial tools in response to the market volatility stemming from the pandemic’s earliest days. While the market would largely go on to recover during much of this period, general reverse mortgage interest continued to fuel loan production.
In 2020, FHA reported that the reverse mortgage portion of the Mutual Mortgage Insurance (MMI) Fund had improved, though still operated in negative territory. The following year, the reverse mortgage program hit positive territory for the first time since 2015, fueled largely by higher rates of home price appreciation and lower interest rates.
However, a large share of pandemic-era reverse mortgage loan production has come from existing customers refinancing into a new reverse mortgage. This has led to some expressed concern by industry analysts about unsustainable product growth. Nevertheless, reverse mortgage business in 2022 appears to be off to a strong start according to endorsement data.
After making an initial promise to upgrade the ability for consumers and other stakeholders to engage with the CFPB complaint database in new ways during the summer of 2019, the Bureau implemented its updates to the database in July of 2020 with new visualization options.
Visit the CFPB Consumer Complaint Database.