CFPB Unveils Complaint Database; Soon to Include Mortgages

The Consumer Finance Protection Bureau (CFPB)
rolled out another new consumer tool this morning, an on-line complaint
database
.  The database, currently in
beta format, provides loan-level information on complaints logged with the
Bureau by customers. The database is currently limited to complaints regarding
credit cards but the Bureau intends to expand it to include mortgages, payday loans,
and other consumer financial products.

There is no information that in any way identifies
the consumer, but the company issuing the card is identified as well as the
type of complaint (billing dispute, interest rate, collection practices, etc).  Other information includes the steps taken in
resolving the complaint, tracking dates and the current status of the
complaint. The accessibility of the information will allow consumers to track their
complaints (with an identifying number) and permit the public to judge the
actions of the bureau as well as assess the manner in which companies handle
and resolve disputes.  

Credit card companies are expected to
respond to consumer complaints within 15 days and to resolve all but the most
complicated issues within 60 days.  The
database indicates whether the dispute has been handled in a “timely” manner
and whether the customer has accepted the card company’s action.

The beta version of the site contains
information only on complaints received after June 1 however the Bureau intends
to backfill information once the full version of the program is on-line.

CFPB’s website said, “No longer will
consumer complaints only be known to the individual complainant, bank,
regulator, and those in the public willing to pursue this information through
the Freedom of Information Act. Instead this data-rich window into consumer
financial issues will be widely available to everyone: developers,
policymakers, journalists, academics, industry, and you. Our goal is to improve
the transparency and efficiency
of the credit card market to further empower
American consumers.”

ABA’s Response:

Kenneth Clayton, ABA’s executive vice president of legislative affairs and chief counsel

“While our industry stands ready to work with the CFPB to
resolve customer concerns, the Bureau’s plan to release unverified data
is disappointing and could mislead consumers.  Publishing allegations is
often different than publishing facts.  The Bureau itself acknowledges
the complaints could be inaccurate, and in fact plans to disclaim their
accuracy.*  This makes the proposed database a questionable – even
misleading – resource and risks tarnishing the reputation of individual
companies without substantiation.

“Complaint
resolutions are best handled in a fair and unbiased manner between the
parties involved.  Where regulators believe process problems exist, they
have ample authority to correct them.  Publicizing allegations that may
or may not have any basis in fact raises serious questions about the
balanced review we expect from our government agencies.  It feeds the
perception that the Bureau wishes to politicize the process rather than
analyze the facts involved.

“The banking industry takes every complaint seriously and
works every day to resolve customer issues.  We’re proud of the
customer service we provide and the numbers speak for themselves.  Of
the more than 383 million credit card accounts in the U.S., less than
one-hundredth of one percent have submitted a complaint to the Bureau. 
Customer satisfaction will always be our industry’s top priority.”

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Mortgage Fraud Rates Show Some Purchase/Refi Correlation

Interthinx, a provider of comprehensive risk mitigation solutions, has released its 12th quarterly report and its Mortgage Fraud Index which measures four types of fraud common to the mortgage industry.  The composite index for the first quarter of 2012 which is derived from the four underlying indices, dropped to 139, its lowest point since the second quarter of 2009.  This represented a change of -4.3 percent from the fourth quarter of 2012 and -3.1 percent from one year ago.

Nevada returned to the role of “riskiest state” after being displaced by Arizona in the fourth quarter.  Arizona fell to second place followed by Florida, New Jersey, and California.

Much of the report centers on those metropolitan statistical areas (MSAs) with the highest fraud risk.  Two MSAs in Florida, Cape Coral and Miami occupy the first and second spots with composite risk scores of 248 and 241 respectively.  They are followed by Modesto and Chico, California and Las Vegas. 

The report notes significant movement among MSAs as to the levels of fraud, the types of fraud, and their relative positions in the rankings since the previous quarter.  For example, Stockton, California had been the riskiest city for three consecutive quarters but saw a 24 percent decrease from the fourth quarter of 2011 to drop to 7th place. 

The Property Valuation Fraud Index was 213, down 11.8 percent from the previous quarter and 4.7 percent from one year earlier.  Property Valuation Fraud is perpetrated by manipulating property values to create false equity which can be used for various purposes.  Florida led the nation in this type of fraud with five metropolitan areas (MSAs) in that state making in the top ten.  Cape Coral Florida had an index of 482, more than twice the national value, a major reason why it was also the riskiest MSA overall.  Las Vegas was second with an index of 440, but every MSA in the top ten had an index score of at least 401.  

The Identity Fraud Index was 140, down 2.2 percent from the fourth quarter of 2011 and 24.4 percent from the first quarter of 2011.  Identify fraud is frequently used in schemes to hide the identity of the offender and to obtain a credit profile that will meet lender guidelines.  The hot spot for this fraud was San Jose, California with an index of 293; Detroit was second and Ann Arbor, Michigan was in third place.

The Occupancy Fraud Index finished the quarter at 61, 23.2 percent lower than one year ago and down 2.1 percent from the previous quarter.  Offenders commit occupancy fraud by falsely claiming they intend to occupy the property they are purchasing in order to obtain a mortgage with a lower down payment or a lower interest rate.  Miami was the riskiest for this fraud, moving from second to first place even though its score of 104 was a decrease of 23.6 percent from the previous quarter.  Other MSAs appearing high on this list were Jacksonville, North Carolina; and Flint, Michigan.

The fourth type of fraud is measured by the Employment/Income Fraud Index.  This occurs when a mortgage applicant misrepresents income in order to meet underwriting guidelines.  Nationally this fraud risk has increased 18.1 percent over the last year and 4.5 percent from the fourth quarter of 2011.  Burlington, Vermont leads in this category of fraud risk with an index of 271, 80 points higher than San Diego which was in second place.  Eight out of the remaining nine MSAs in the top ten for this type of fraud are in California.

As interest rates declined the composition of loan applications in the Interthinx database have changed from a nearly 60:40 split between purchases and refinances in Q2 2011 to a 40:60 split in the first quarter of 2012.  The geographic changes that may have been caused by the composition shift were extremely granular in nature; however the type-specific risk indices did show some significant trends, especially in Identity and Occupancy Fraud Risk which saw decreases of 22 and 23 percent respectively and the Employment/Income category which increased 18 percent.  Both indices that decreased have lower values for refinances relative to purchases while the reverse is true for the Employment index.  Interthinx speculates that at least part of the major type-specific trends over the last year may be related to a change in loan composition. 

Interthinx maintains that its indices have proven to be reliable leading indicates of default and foreclosure activity therefore it advises that areas that bear watching going forward are Nevada and Arizona, the two riskiest MSAs in Florida, Cape Coral and Miami, and the New York Tri-State area where risk is rising in all three states, New York, New Jersey, and Connecticut.

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LPS Provides Peek at March Mortgage Data

Lender Processing Services (LPS) has released an advanced look at data from its March Mortgage Monitor Report due out on May 1.   The report provides end-of-month loan level data culled from the LPS database of nearly 40 million mortgage loans.

Loans that were at least 30-days past due but not yet in foreclosure represented 7.09 percent of all loans at the end of the reporting period, down 6.3 percent from the previous month and 8.8 percent from a year earlier.  Loans in foreclosure (foreclosure pre-sale inventory) were at a rate of 4.14 percent, up 0.1 percent month-over-month but 1.6 percent lower than a year earlier.

There were 3.5 million loans that were 30 days past due at the end of the period and 1.64 million that were more than 90 days past due but not yet in foreclosure.  The pre-sale inventory totaled 2.06 million for a total of 5.59 million loans in some state of delinquency or foreclosure.

Florida, Mississippi, Nevada, New Jersey and Illinois remain at the top of the list of states with the highest percentage of non-current loans.

———

Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure):      7.09%
Month-over-month change in delinquency rate:    -6.3%
Year-over-year change in delinquency rate:      -8.8%
Total U.S. foreclosure pre-sale inventory rate: 4.14%
Month-over-month change in foreclosure presale inventory rate:  0.1%
Year-over-year change in foreclosure presale inventory rate:    -1.6%
Number of properties that are 30 or more days past due, but not in foreclosure: (A)     3,531,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:               1,643,000
Number of properties in foreclosure pre-sale inventory: (B)     2,060,000
Number of properties that are 30 or more days delinquent or in foreclosure:  (A+B)
5,591,000
States with highest percentage of non-current* loans:   FL, MS, NV, NJ, IL
States with the lowest percentage of non-current* loans:        MT, AK, SD, WY, ND

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March Loan Statistics Detailed in Ellie Mae Report

The second edition of a new report looking in depth at the mortgage origination market was released today by Ellie Mae.  The report for March reviews and compares data amassed from loan applications in its database for March compared to February 2012 and September and December 2011.  Ellie Mae States that there were two million loan applications processed through its systems in 2011 and the survey is based on a “robust” sample of those applications. 

The report outlines the characteristics of the loans for each of the four monthly periods.  Because of the volume of data contained in the report, we will summarize figures for February and note any substantial variations from the three earlier periods.

Sixty-one precent of loans originated in March were for the purpose of refinancing, about the same as three and six months previous but down from 67 percent in February.  FHA-backed loans accounted for 28 percent and conventional loans for 64 percent of the total compared to 25 percent and 67 percent in February.  A typical loan regardless of its purpose took 42 days to close in March, about the same as in February but down three to five days from December. 

The majority of loans were 30-year fixed-rate loans (FRM) but 20.2 percent were 15 year notes and 4.2 percent were adjustable rate mortgages (ARMs.)  The incidence of ARMs has decreased in each of the reporting periods since September when they had a 6.0 percent market share.  The average note rate for a 30-year FRM has declined steadily from 4.412 in September to 4.080 in March.

Ellie Mae calculated a “pull-through” rate for a sampling of loans for which applications had been submitted 90 days earlier.  The pull through for March was 47 percent with a higher percentage (56.4 percent) of purchase mortgages closing than loans for refinancing (42.1 percent.

The average loan closed in March had a FICO score of 749, a loan-to-value (LTV) ratio of 77 percent and a debt-to-income (DTI) ratio of 23/35.  A loan that was denied had a FICO on average of 699, an 85 percent LTV, and a DTI of 27/43.

 Jonathan Corr, chief operating officer of Ellie Mae said of the closed loan statistics, “In March, as we moved into the Spring selling season, underwriting standards for both purchase and refinance loans continued to be highly conservative.  The average loan denial in March still had a FICO score just shy of 700, and more than 15% in equity or a down payment.  On average, there was an 8-point spread between back-end DTI ratios for approved-versus-denied loans last month.”  Average denials for conventional refinances and purchases, he said, continued to have significantly higher FICOs, lower LTVs and more restrictive DTIs than the overall averages.

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CoreLogic: 28% of U.S. Homes now Underwater

With home prices nationwide continuing
to decline it is not surprising that the number of homeowners who are
underwater
(i.e. owe more on their mortgages than the value of their home)
continues to increase.  CoreLogic
released Quarter Four data this morning showing that 11.1 million or 22.8
percent of all U.S. homes with a mortgage were in a negative equity position
compared to 10.7 million in the third quarter and an additional 2.5 million
borrowers were in a near-negative position. 
Together these negative and near-negative homeowners own 27.8 percent of
all mortgaged residential properties
compared to a total of 27.1 percent in
Quarter Three.   The total mortgage debt outstanding these properties
rose from $2.7 trillion in the third quarter to $2.8 trillion in the fourth
quarter.

Not all negative equity is the result of
declining prices.  Some mortgages are underwater
because of negative amortization of their mortgages, non-payment, or
restructuring of debt to avoid foreclosure. 
The level of negative equity is a concern because it is at the root of
many mortgage defaults.

CoreLogic said that, based solely on loan-to-value
ratios (LTV), it estimated that 18 million borrowers might have been eligible
for refinancing under the guidelines of the original Home Affordable Refinance
Program (HARP).  Under LTV guidelines for
the newly expanded HARP which removed the earlier 125 percent LTV cap, over 22
million borrowers may now be eligible to refinance.

Borrowers with multiple liens on their
homes are more likely to be in a negative position.  Of the 11.1 million underwater borrowers, 6.7
million have only a first mortgage lien.  This group has an average mortgage balance of
$219,000 and negative equity of $51,000 or a LTV of 130 percent.  These underwater borrowers represent only 18
percent of all borrowers with only a first lien on their home.  Forty-one percent of these borrowers had an
LTV in the fourth quarter of 80 percent or higher.

Among all borrowers with both a first
and second lien on their home 4.4 million or 39 percent were in a negative
position.  Their average mortgage balance
was $306,000 and the average LTV was 138 percent, i.e. negative equity of
$84,000.  Over 60 percent of borrowers
with two liens had combined LTVs of 80 percent or higher.

The highest percentage of underwater
homes is in Nevada where 61 percent of mortgaged homes have negative equity
followed by Arizona (48 percent), Florida (44  
percent) Michigan (35 percent) and Georgia (33 percent.)  Not surprisingly these states have all ranked
high in the incidence of foreclosures.   

Mark Fleming, CoreLogic’s chief
economist said, “Due to the seasonal declines in home prices and slowing
foreclosure pipeline which is depressing home prices, the negative equity share
rose in late 2011. The negative equity share is back to the same level as Q3
2009, which is when we began reporting negative equity using this methodology.
The high level of negative equity and the inability to pay is the ‘double
trigger’ of default, and the reason we have such a significant foreclosure
pipeline. While the economic recovery will reduce the propensity of the
inability to pay trigger, negative equity will take an extended period of time
to improve, and if there is a hiccup in the economic recovery, it could mean a
rise in foreclosures.”

CoreLogic’s database includes 48
million mortgaged properties, approximately 85 percent of the U.S. total.  Information on liens was gathered from public
records and current home values were estimated using CoreLogic’s Automated
Valuation Models for residential properties.

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