When entering the realm of statistics, numbers definitely have the potential to weave plenty of misleading and false narratives.
This is unfortunate since stories based on quantitative data tend to survive on their numerical authority alone, while sometimes hiding behind subtle deceptions based on the foundation of mathematical analysis.
Such is the case with the Consumer Financial Protection Bureau (CFPB) Consumer Complaint Database. The database is filled to the brim with complaints about servicers, lenders, and financial service providers.
Was a servicer late in dealing with a loan modification, unreceptive by phone, or flat out unhelpful or rude? The CFPB database of complaints is there to catch those grievances and report them to financial services industry and the world as informed data.
But probe deeper, as some analysts did recently, and the numbers from the CFPB do not look as daunting or as thorough as they do at first glance.
In fact, the industry discovered that simply analyzing data from the CFPB is not enough, especially since the database arrives with its own built-in bias—that bias being the very nature of the database itself. It collects complaints, not praises, and ignores the larger universe of loans serviced nationwide.
To fill the void of well-rounded data, Black Knight Financial Services and the Five Star Institute jumped into the missing space and used data from the CFPB database and its own analytics to inform its latest white paper on CFPB complaints.
The big takeaway from the report: servicers have improved tremendously.
The Numbers in Context
As servicers become preoccupied with fixing problems reported in the database, one significant development has slipped under the radar: the number of CFPB complaints plummeted by more than 50 percent for loan modifications, collections, and foreclosures during the two-year period stretching from 2013 through 2014, according to a recent white paper titled “Analysis and Study of CFPB Consumer Complaint Data Related to Mortgage Servicing Activities,” produced by Black Knight Financial Services in conjunction with the Five Star Institute.
The results paint a picture of an industry that has made incredible strides.
The number of non-current loans fell from more than 5 million in the first quarter of 2013 to under 4 million in the fourth quarter of 2014, reflecting a 27 percent drop.
Five Star President and CEO Ed Delgado, who initially proposed the idea for the report last year in response to mounting criticism of the industry by the CFPB, maintains the purpose of the report is not to “dismiss or diminish” the validity of the inquiries by consumers, but rather to “position and better understand the data.”
“The information contained in this report plays an important role in measuring the scope of volume related to CFPB inquiries made, in juxtaposition to the total number of mortgage holders in the U.S. market,” Delgado said. “Through the data lens, we can clearly examine operational efficiency and defect while measuring progress in providing quality service to homeowners.”
“A 53 percent reduction in complaints about loan modifications and foreclosures is great news,” Freddie Mac spokesman Brad German said. “I would attribute much of the improvement to the rising diligence and effectiveness of many servicers plus the impact of the Servicing Alignment Initiative, which requires early and frequent outreach to borrowers who need assistance.”
To produce these numbers, Black Knight and Five Star made the commitment last year to promote a greater understanding of CFPB data by creating a prototype report using data contributed by the CFPB and servicers. Conclusions from the first report published in April show servicers are performing at optimum levels in dealing with non-current loans.
“I think it does demonstrate that the industry has been focusing on the more difficult loan population: the non-performing loans, those that are in some stage of delinquency,” said Dori Daganhardt, VP of product marketing and market strategy at Black Knight Financial Services. “They are trying to ensure that the customer experience through that process has improved.”
Black Knight’s loan-level data report aims to provide the industry with a closer look at the CFPB’s data, so they have an accurate assessment of what is happening with both current loans and non-current loans facing servicing complaints.
Daganhardt said the data is intended to inform both regulators and financial firms as they track and respond to trends in the CFPB database. Her interpretation of this first report is that the “industry has been responding to the complaints and has tackled probably the most difficult cohort of the whole servicing book.”
She added, “What we see in the data, complaints are falling in the delinquent, default and foreclosure category, but the overall book is falling. The absolute overall number of complaints has decreased, and the overall book of loans has declined.” For Daganhardt, this “speaks positively of the efforts servicers have undertaken.”
The Industry Responds
Bob Caruso, EVP of sales, strategy, and servicing at Black Knight firm, ServiceLink, supports the ongoing loan-level analysis and suggests the industry is hungry for data that will detect areas of risk, while celebrating improvements made.
“The report helps servicers understand how they are performing versus the average and whether we have the same pain points as our peers,” Caruso said.
“We’re all happy that complaint volume is low but also quite aware that we have more opportunity to improve. My hope is that consumers better understand that although the industry has been through a lot, we are better for it and will continue to improve. Complaints are much lower than we think customers may be aware.”
Ray Barbone, EVP of BankUnited, suggested the Black Knight white paper is a revelation of sorts—one that will hopefully show the industry is performing quite well when it comes to loan servicing.
“More specifically, notwithstanding the fact it has been widely publicized that mortgage servicing issues are one of the highest segments of complaints and that there have been thousands of such complaints received, it is equally worth noting that, according to the report, complaints related to general servicing of performing loans appear to be running at less than one 1/100th of a percent,” he explained. “It would be interesting to see a comparison of similar analyses for other financial services segments as well as non-financial service industries. Further, I think the report provides lenders with the benefit of some very high-level data by which to benchmark themselves.”
The white paper reflects a change in how the industry not only interacts with data, but also with the CFPB itself.
The industry has shown an interest in working with its newest regulator to fix the problems detected, but at the same time, servicers desire more informed data. One issue yet to be addressed is whether the regulator is able to add context to complaints that enter into the CFPB database.
“I would like to see the industry and CFPB continue to work together to provide even deeper context relative to complaints received, particularly regarding the percentage of complaints verified,” Barbone added.
The issue of whether complaints are analyzed and probed for accuracy and context is a sticking point for others in the industry as well.
“I think the whole report is interesting,” Caruso said. “I would like all the servicing company participants to contribute more data so we can get more granular. That may enable us to learn more yet. I’m curious on the amount of relief being given to customers and why, and I’d like to learn more details on whether many of the complaints are really complaints. Our data indicates that many of the complaints are really just inquiries and that other complaints are simply due to the customer not getting the answer they want.”
Caruso went on to explain that customers typically become upset when denied a loan modification, and the reason for the denials should not be extracted from complaints made to the CFPB.
The database, however, allows these complaints to creep into the system without specifying whether the consumer failed to qualify for a loan mod under HAMP or another government program—or whether there was truly an error on the servicer’s part.
A Desire for More Contextual Data
Going forward, the industry seems to accept the idea of a database, as long as analytics are informed and the database continues to improve in providing context to individual complaints.
Without context, it is merely an echo chamber for consumers. In the right context, it becomes a positive tool for both consumers and servicers.
“I don’t think this has changed anyone’s approach, but it is concerning that customers will have the ability to say whatever they want and the only public response we will have via the CFPB is a drop down box to explain what may have happened,” Caruso added, when discussing the limited remedies available to servicers to respond to reported complaints.
“I don’t see how this helps anyone. The more detailed data we have the more we can understand what customers issues they have and how to address them,” Caruso added. “We may not set the rules for topics like whether a customer qualifies for a modification with HAMP, Fannie, Freddie, FHA, but we can treat customers with respect and show empathy with the issues they do have.”
Daganhardt, who conveyed a desire to help both the CFPB and the industry with improved data, said there is a wish list so to speak of tools that could help all respective parties with data analysis. One of the areas of concern is the drop-down menu borrowers use when making a complaint. Often, a borrower will misclassify a home equity loan for a mortgage loan, which throws off the reporting. Daganhardt also would like to see standard codes for each “reason a loan goes into default.”
Currently, database users are able to comment in a free-flow text fashion, but this makes it difficult to structure and organize the data, Daganhardt said.
“That free text goes to the servicer as well, and they can act upon it. But, unfortunately, it gives the opportunity to misrepresent complaint trends and volumes before the back-end forensics is completed by the servicers,” Daganhardt explained. “If there is more of a survey type of process in the consumer portal, that facilitates more accurate responses by the borrower and maybe even offers some education along that way that would be better for everyone else involved.”
Daganhardt’s desired outcome would be a situation in which an improved question and answer process is implemented to collect and organize the consumer data.
“The more intelligent questions that they would be asked would ultimately capture more accurate data from them,” Daganhardt explained. Right now, she said, “there are a limited number of drop-down menu options. Borrowers are left to their own devices.”
Tim Rood, chairman of the Washington, D.C.-based Collingwood Group, said, “I thought the report was insightful and should quiet critics of the industry’s customer service.”
Kim Yowell, SVP and servicing manager for Tulsa-based BOK Financial, echoed Rood’s comments. “The aggregated data confirms that the measures the mortgage banking industry has undertaken to address default related customer issues and complaints has had a positive impact on our customers.”
But in their second act since the CFPB launch, servicers desire something more than numbers. They want the same thing the CFPB desires: a complete 360-degree view of each borrower who makes a complaint and of the complaint itself.
Without more of this granular data, everyone is doing nothing more than chasing numbers in a box.