Thursday, August 20, 2009

Complaining to HUD about Servicing: Thunder on Deaf Ears?

Posted on Credit Slips by Katie Porter:

In my own research, and frequently on Credit Slips, I've noted problems that homeowners face in dealing with their mortgage servicers. As a recent post from guest blogger Max Gardner explained, many of these problems are structural to the servicing industry. I think the people on the phone are good folks, trying to be helpful, but without the tools, training, and resources that they need to do so. One marker of the increasing pressure that servicers are under is the HUD complaint statistics. According to this Pro Public report, mortgage servicing issues were 31% of complaints to HUD in 2006. Just two years later in 2008, that fraction has jumped to 78%. No surprise here. More families are in default or foreclosure and that means more friction between homeowners and servicers. And as many of us have pointed out, consumers aren't the mortgage servicers' customers--the mortgage note holders are. So it makes sense that consumer satisfaction ("non-customer satisfaction", so to speak) is low in the industry.

The interesting part to me is that HUDs own complaint website doesn't even list mortgage servicing as an area of concern. Four out of five consumers who contact HUD are frustrated with their mortgage servicer, but HUD doesn't even acknowledge--at least in the obvious location--that it is in charge of complaints about mortgage servicing? I think this reflects a real problem in consumer protection regulation. Perhaps HUD sees mortgage servicing as just pretty far afield from its core concerns about housing discrimination and federal housing programs. HUD, more than any other agency anyway, has authority to implement the Real Estate Settlement Procedures Act (RESPA), which provides a process (a QWR) for consumers to motivate servicers to respond to problem. But historically, and still today, HUD's oversight of mortgage servicing could generously be characterized as "thin." Is mortgage servicing an example of the need for a Financial Product Safety Commission or will the mortgage market (when, and if, it revives itself) offer new and improved servicing models that reduce consumer frustration and improve transparency?

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