The voices of Urban Institute's researchers and staff
August 30, 2018

Robocall laws can interfere with important mortgage borrower communications

August 30, 2018

Mortgage servicers perform all the processing work after a borrower takes out a mortgage, including remitting monthly mortgage payments, property taxes, and insurance premiums and working with delinquent borrowers. Successful mortgage servicing depends on smooth communication between mortgage servicers and borrowers.

But according to a recent US Treasury report, a 27-year-old law that limits calls to cell phones is interfering with mortgage servicers’ ability to communicate with borrowers. The Federal Communications Commission (FCC) recently closed a comment period on the law’s interpretation and implementation. The Treasury report makes it clear that the opportunity to revisit this law is good news.

The 1991 Telecommunications Consumer Protection Act (TCPA) was passed as a response to escalating telemarketing calls and the use of automatic telephone dialing systems (autodialers) to dial lists of random or sequential numbers. The act generally prohibits the use of autodialers to contact any consumer via cell phone without first receiving their consent.

Although the TCPA’s original purpose remains important, certain aspects of the law can discourage mortgage servicers from reaching borrowers when that contact could be helpful.

Servicers sometimes need to communicate time-sensitive information to thousands of borrowers, such as during hurricanes and other natural disasters. Autodialers can send alerts quickly and effectively to thousands of people, notifying them about mortgage relief options or warning about scams.

Postal service and landlines are often shut down during natural disasters, so establishing contact with displaced homeowners with a cell phone might be the only option.

But under the TCPA, servicers face penalties for using autodialing technology to send messages without consumer consent. In many cases, consent is given at loan origination or during servicing, but servicers can still face penalties for calling a number that might have been reassigned.

The cost of servicing mortgages has skyrocketed, an issue of concern to the Urban Institute’s Mortgage Servicing Collaborative, which first convened in 2017. Imposing additional costs such as TCPA fines, which start at $500 per text or call and can run into the millions, further discourage servicers from reaching out to borrowers via cell phones.

Mortgage servicing is lagging in its adoption of fintech innovations

The rise of financial technology (or fintech) innovations has improved customer service and reduced costs in banking, investing, and originating mortgages, but the adoption of these innovations for mortgage servicing remains slow.

Data from the J. D. Power consumer survey show that mortgage servicers’ use of fintech has declined 2 percent since 2016, with only 20 percent of customers using it. Retail banking stands in stark contrast, with 77 percent of consumers using fintech with consistently increased consumer satisfaction, while satisfaction in servicing has remained stagnant over the past two years.

Most importantly, for the small minority of servicing consumers that consented to receiving account alerts to their cell phones or emails reported satisfaction rankings 11 percent higher than the servicing consumer average.

Persistent and fraudulent robocall schemes remain important for the TCPA to address, but policies should adapt to changing times and take unintended consequences into account. The request for comments offers an opportunity to reassess how this law affects mortgage borrowers.

How to minimize negative impacts on mortgage borrowers

Exempting servicers from penalties for contacting reassigned numbers until first contact is made would encourage mortgage servicers to reach out when it could be helpful to the borrower. This would lower risks for servicers and allow consumers to identify the transferred number, eliminating a major deterrent to initiating communication.

Consumers would also benefit from temporarily exempting servicers from the requirement to obtain prior consent during disasters. This exemption could include a short period of two to four weeks after a natural disaster, when quick dissemination of time-sensitive information about mortgage relief options is crucial.

Photo via Shutterstock.

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