CFPB Mortgage Complaint Process May Have Big Impact

Mortgage & Real Estate

A move by the Consumer Financial Protection Bureau to begin fielding complaints related to mortgages is likely to prove significant as it moves ahead with new mortgage-related rules, observers said Wednesday.

Until now, the agency has only been receiving complaints related to credit cards in order to give itself time to set up its systems. But agency officials have publicly said they plan to use information gleaned from the complaint process to guide their rulemaking.

“It dovetails very closely with some dialogue that was in the examination manual about how they will be using the consumer complaint process for examination and supervision purposes, so it really begins the buildout of the database,” said Kevin Petrasic, a partner with Paul, Hastings, Janofsky Walker, and a former official at the Office of Thrift Supervision.

The CFPB midweek announced its foray into mortgage related complaints,  saying in a report on the first three months of collecting credit card data that it plans to begin taking inquiries related to mortgages and other home loans “on or about Dec. 1.” Officials estimated the number of mortgage-related complaints to be on par with those received last year by federal regulators, which equaled roughly 48,000.

Jo Ann Barefoot, a co-chair at Treliant Risk Advisors, said the bureau is likely to receive more complaints related to mortgages than any other product by far.

“Mortgages are a complicated product, so there’s a lot more basis for complaints than you might have in, say, the credit card area,” she said. “And mortgages are so much in the political, media, cultural spotlight that I would think they’ll generate a lot of complaints.”

She also expects the CFPB to receive more complaints alleging discrimination, which it may use to target unfair or deceptive practices. This could catch some banks off-guard, as many don’t have good complaint systems of their owns and do little complaint analysis, she said.

“The fact that the complaint can arise over things that are not the subject of a technical rule causes difficulty for banks because they are mostly set up to check for the technical rules,” Barefoot said. “Starting a UDAP questioning process with a complaint turns the traditional compliance setup on its head.”

The CFPB release said the agency expects to be ready to handle complaints for all financial products and services by the end of 2012.

Daily Briefing | Thursday, December 1, 2011

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