New Mortgage Complaint Hotline

Got a beef with your mortgage lender? Is your bank unresponsive when you complain that your escrow account is fouled up and making your monthly payments needlessly high?

Did your loan officer switch you into a more costly home loan than you were promised? Or worse yet, did your home loan servicer ignore you when you told him you’ve had an unexpected drop in income and needed a modification to avoid missing payments?

If any of these sound familiar to you, there’s a new federal program that might be of interest to you: the Consumer Financial Protection Bureau’s home mortgage complaint and dispute resolution hotline. Never heard of it? “That’s not surprising since it went live only Dec. 1 and the bureau hasn’t said much about it, preferring to ease into the potential snake pit of mortgage issues that American consumers have with their lenders rather than get overwhelmed.”

The Los Angeles Times reports that, “the Consumer Financial Protection Bureau’s new mortgage complaint service is an extension of the agency’s existing hotline for credit card-related disputes and inquiries.”

Created by last year’s Dodd-Frank financial reform legislation, the bureau is intended to look out for your interests in banking, financial products, home loans and all other forms of consumer credit.  The mortgage complaint service began July 21 as an extension of the agency’s existing hotline for credit card-related disputes and inquiries.

The bureau’s credit card hotline has already received 5,074 complaints. Of this total, 84% were referred directly to the card issuers — mainly big banks — for resolution, while the rest were either reported with incomplete information or were referred to other agencies for resolution.  According to the Times, “About 74% of the complaints were subsequently reported back from banks as resolved, and 71% of the resolutions were not disputed by the consumers who lodged the complaints. Just under 13% of credit card complainants reported that they were not satisfied with the card issuer’s actions.”  The credit card complaint service will provide a basic template for the bureau’s approach to mortgage complaints, which are expected to be greater in numbers.

Here’s a basic breakdown of how it will work:

When a borrower submits a formal complaint to the bureau, complete with account numbers and other key identifiers, the information will be sent immediately to the lender or mortgage servicer named in the complaint using a secure Web portal.
The lender must then review the information, contact the customer if needed and determine what action to take to resolve the matter.

Next, the lender is supposed to report its action — if any — to the bureau, which sends it on to the borrower for review.

The hotline does have a few limitations to note.  Disputes that are a matter of state regulation, or beyond the bureau’s scope may be referred to other agencies.  Disputes that indicate fraud or identity theft will likely be referred to either federal or a state law enforcement authority.  Just for now, the bureau is also referring all complaints involving small banks or their subsidiaries that have less than $10 billion in assets to other agencies.

However, since the vast majority of loan originations and servicing in the mortgage filed are controlled by the top 10 largest banks or their subsidiaries, a very high percentage of the complaints received are likely to be handled by the bureau.

An added bonus for consumers who do file a complaint is that throughout the process, borrowers can log on to a special consumer site, or call the toll-free number, to check for any updates, to provide additional information on the complaint, and to review any responses from the lender.

It all sounds great in theory but how will it work out?

Though consumer groups are optimistic, and the bureau says it’s staffed and ready to go, some mortgage industry leaders worry that the agency could be taking on more than it can realistically handle and raising borrower expectations that can’t be met.  If the bureau is not properly equipped to handle large volumes of emails and calls, the service could be ‘an investigatory black hole’ where complaints are filed but not addressed quickly or adequately, and it could be ‘a net negative’ for borrowers who have genuine problems.

A full report on the results of the first few months is expected from the agency is expected sometime early in 2012.

The complaint hotline is accessible online at http://www.consumerfinance.gov and by toll-free phone between 8 a.m. and 8 p.m. Eastern at (855) 411-2372.

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