Just weeks after the Consumer Financial Protection Bureau was called out for its secrecy and closed-door policies, and days before a House investigation into allegations of discrimination and abuse at the regulatory agency, the CFPB published its annual Consumer Response Annual Report.
The problem is, anyone can make a complaint. As a HousingWire reader points out in a letter to the Editor:
“Every time I read the CFPB's press releases in the form of news articles I realize the CFPB is trying to justify their existence. I am not saying there are not bad players in the industry but I am saying there are more bad players in government.
“Our little servicing group has received two complaints in the last four months. For the most part, we get things right. Of the two complaints, none of them were valid. One person complained that we call too frequently and that is a direct result of the new regulations from HUD and the CFPB. Another complaint is that we didn't build a wheelchair ramp on the house according to the purchase agreement. (Well, we are the company that gave him the loan to purchase the house and not the party that entered into that contract but try telling this guy that.) My point is, how many of those … complaints are valid? Just because the CFPB received … complaints doesn't mean any of those complaints are valid.”
Fair point. Let’s break down the numbers.
The CFPB reports that it received 163,700 consumer complaints in 2013, nearly double the total 90,000 they received in 2012. Of that, 59,900 are mortgage related.
CoreLogic (CLGX) estimates there are about 50 million active mortgages in the United States.
So in total in 2013, only 0.119% of all mortgage holders in the United States filed a complaint with the CFPB.
Still, a tiny percentage of a huge number is formidable in this case. Almost 60,000 complaints about mortgages filed in one year.
Let’s call that about 5,000 complaints related to mortgages per month.
The CFPB currently employs about 1,400 people, who presumably all work together in temporary office space while the CFPB is spending $145.1 million to renovate a building that it doesn’t own. Of those, only 140 are employed with the consumer response staff.
So those 140 are handling about 166 complaints a day related to mortgage issues, primarily focused on issues with loan modifications, collections, or foreclosures.
That doesn’t seem like a lot, but they handle at least 200 other complaints a day that aren't related to mortgages. So, chances are, they feel pretty swamped.
But let’s dig a little deeper. What about the validity of the complaints?
Of all mortgage complaints, 77% are closed with a simple explanation or clarification to the consumer, without relief of any sort.
Another 3% are closed without relief or explanation. Right at 5% involved an administrative response. The company in question was reviewing the complaint in 6% of the cases, and in less than 1% of the cases, the company did not provide a timely response.
Just 2% involved the case being closed with monetary relief for the complainant, while 7% involved non-monetary relief for the consumer.
So in less than 2% of the cases, the company was demonstrably wrong and monetary relief was provided. In 7% of the cases, non-monetary relief was provided.
That means 4 out of every 5 complaints get closed with an explanation, or dismissed without even bothering with an explanation, much less relief to the consumer complainant.
That’s of the 0.119% of mortgage holders who filed a complaint at all.
Christopher Whalen, a New York-based author, investment banker and contributor to HousingWire wrote for us a piece on Tuesday that focused more broadly on consumer advocates and not the CFPB in particular, but something he said seems relevant.
“The sad fact is that the consumer advocates, trial lawyers and regulators make a living by perpetuating the notion that all lenders and loan servicers are evil and stupid, and that all consumers are victims. This is simply not the case. There is a whole class of victims – namely the shareholders of banks, investors in private mortgage securities and the US taxpayer – who are being damaged each and every day because of the unfair and self-serving representations made by consumer advocates.”
If an incredibly complex and wide-ranging industry like housing sees just one-tenth of 1% of its customers end up complaining — and 80% of those complaints are closed with just a single explanation or none at all — does that mean that the mortgage industry is disproportionately mismanaged?
Or is it a sign of much ado about nothing?