How The Pandemic Impacted Servicing Complaints And What’s Ahead

SLK Global Solutions, a business process transformation enterprise offering digital platforms and solutions for the financial services industry, recently announced achieving remarkable results with Copasys, an enterprise-wide platform for quality control (QC) and regulatory compliance. Copasys (patent pending) is designed to solve any organization’s QC and regulatory compliance problems by automating the testing of compliance functions, including manual and robotic process automation (RPA) enabled processes. Copasys then uses data analytics to identify deficiencies and remediate them quickly. It is 20 times faster than manual auditing, ensures 100% accuracy of business rules and regulations, and provides 100% sampling coverage. Fully configurable and customizable, Copasys is currently being used for card dispute resolution and mortgage servicing, and is being pilot tested for use in mortgage origination, title, tax and settlement, banking and insurance. Zaid Shariff, vice president – head of solution design and product implementation for SLK Global Solutions, shared his thoughts on how the pandemic is impacting servicing complaints.

Q: What kind of complaint activity are we seeing as a result of the pandemic?

ZAID SHARIFF: In March, more than 3,400 complaints were filed with the Consumer Financial Protection Bureau, which is the highest monthly total in three years. Prior to that, the agency was averaging about 2,500 complaints per month since January of last year. The complaint totals are both for origination and servicing, but clearly servicing issues are behind the current spike. The CFPB recently reported delinquencies are higher than at any point since the Great Recession.

Q: Has the CFPB indicated what issues are driving the complaints?

ZAID SHARIFF: Yes. More than two million borrowers are still in some form of forbearance plan. However, according to the CFPB’s May 2021 Complaint Bulletin, many borrowers say they have not been fully informed about their options by their servicers. Others are experiencing long delays in getting loan modifications so they can resume monthly payments, often because their servicers are requesting additional documents. Many borrowers are reporting communication problems with their servicer as well.

Q: What is the outlook over the next year or so?

ZAID SHARIFF: In six months, when forbearance arrangements come to an end, I believe we’re going to see foreclosure rates spike. In fact, acting CFPB Director Dave Uejio said the agency is expecting a “tidal wave” of distressed borrowers who will need servicing assistance in the next several months. We’re already seeing evidence of that.

Q: What does that mean for complaints?

ZAID SHARIFF: As defaults and foreclosures soar, we will likely see even more complaints. The reality is that there are still a lot of distressed borrowers facing financial insecurity.

Q: Are mortgage servicers prepared for these changing dynamics?

ZAID SHARIFF: Some are. But many are already overwhelmed, and most are not prepared for what is about to hit them. The fact is most servicers don’t have the systems in place to handle a rapid increase in complaints. Many haven’t updated their systems in years.

Q: What should they do to prepare for this?

ZAID SHARIFF: Obviously, servicers need to have a system in place that ensures each complaint or dispute is addressed and resolved. More specifically, they need systems that are able to identify trends in which multiple borrowers experience the same problems, then make changes to their process so that additional borrowers aren’t affected.

Q: How do you recommend they go about implementing these systems?

ZAID SHARIFF: There are already multiple automated solutions available to servicers to manage disputes and complaints. Our own solution, Copasys, provides a centralized mortgage servicing compliance testing ecosystem that is constantly updated with the latest CFPB requirements. With it, servicers can run frequent tests to identify the source of servicing complaints and permanently remediate them.

We’ve found that servicers that implemented Copasys have sped up complaint resolutions by 20 times compared to their previous methods. Regardless of the system servicers choose, the CFPB’s message to servicers is clear: If you haven’t upgraded your complaint resolution processes, you’d better do it now.

INSIDER PROFILE

Zaid Shariff is vice president – head of solution design and product implementation for SLK Global Solutions, a provider of digital platforms and business process management solutions to the banking, mortgage, and financial services industries. Zaid has more than 12 years of experience performing QC, compliance testing and internal audits for financial services companies. His past roles include assistant vice president in charge of internal audits at Mr. Cooper and risk and controls audit manager for Nationstar Mortgage. Zaid can be reached at zaid.shariff@slkglobalsolution.com.