The Covid-19 era has hit the mortgage industry on all sides – operations, finance, foreclosures, customer service, and more. The growing instances of unemployment, fewer income opportunities, and rising costs of living have impacted millions of lives, including mortgage borrowers. As the financial scenario across the U.S. deteriorates, borrowers find it exceedingly difficult to make timely mortgage payments, and lenders are getting a rising number of mortgage loss mitigation requests. Lenders are forced to come up with effective loss mitigation strategies to keep borrowers current on their mortgage dues. In cases where there’s no way the borrower can afford their mortgage payment, lenders are ensuring loss mitigation services that lessen the negative impact of foreclosure.
For the lender, even though they are operating in dire circumstances with reduced workforce capabilities, disrupted operational workflows, and a plummeting bottom line, they must focus on the experience of the borrower. This is critical to the lender’s business as it determines the lender’s reputation in the market and helps prevent business losses that result from negative publicity in public forums.
Why Borrower Experience Should be the Focus of Lenders
The power imbalance in the borrower-servicer relationship tends to interfere with the servicer’s intent to deliver a good borrower experience in the loss mitigation process. Borrowers are also in a terrible state and might be harboring negative feelings about the situation and their reduced ability to select a servicer. Furthermore, mortgage servicers that receive lucrative fees for executing the foreclosure process may lack the incentive to accommodate the borrowers’ interest. As a cumulative effect of these factors, lenders are at the risk of bearing potential reputational costs, compliance adherence violations, compliance scrutiny and the possibility for litigation, and loss of business stemming from poor customer reviews.
Loss of Business
There is a misconception among the borrowers that the sole focus of lenders rests on their cost-cutting efforts and profit-making opportunities, even if it is at the expense of the customer service. In fact, poor service quality and brand perceptions are the major drivers of product selection decisions. Since the mortgage market would bounce back once the Covid-crisis subsides, borrowers would have multiple options to choose from and would not hesitate to sever ties with a lender offering a poor experience. This visible erosion of trust in the lender’s services decays the customer lifetime value and hits the top line of the lender.
Lenders should be aware that poor customer experience doesn’t just leave that particular borrower with a bad taste but has far-reaching implications. The individual might not spread the good word about the lender but would certainly broadcast even one-off bad experiences to their personal network and the greater public. They have access to all digital platforms that can spread their thoughts like wildfire. This can potentially establish a poor image of the lender among its customers and prospects, leading to the loss of opportunities in such an aggressive market.
Refinancing of Mortgage
Another concern for third-party servicers is that when the borrower decides to go for the refinancing of their mortgage, they are unlikely to risk relying on a servicer with a reputation of delivering below-par service. Factors such as poor property tax management, delays in applying for payments against balances, and downright unresponsiveness force borrowers to steer clear of such servicers. Even lenders do not enlist such servicers to help them out in carrying out their daily operations, including incentive-based tasks such as foreclosures and loss mitigation.
High Operating Overheads
Poor customer service, besides causing a drop in the revenue, also raises the operating costs of the servicer owing to several process inefficiencies. When the workflow is not streamlined, the workplace tends to be chaotic, and employees need to make lengthy calls, escalate too many service requests, and rely on manual procedures not known for delivering accurate outcomes. All these combine to skyrocket the expenses of the loss mitigation process and other such operating procedures, causing the already tight margins to dry up further. Mortgage servicers and lenders have to safeguard their revenues and profits by protecting the image of their brands, and good borrower experiences is a non-negotiable part of doing that.
Amidst the growing Covid-19 induced uncertainties, industry regulators are taking a keen interest in addressing the grievances of borrowers against lenders and services. In the current circumstances, it’s easy for borrowers to attract the attention of regulators on any bad experiences that they face during the mortgage lifecycle. Regulators use the complaints of borrowers to uncover compliance issues (fair lending, RESPA, etc.) against lenders. The servicer might be asked to arrange for additional resources to address the issues, such as a manual review of loss mitigation requests.
On failing to comply or if the regulators are not satisfied with the outcomes, they may elevate the scrutiny to enforcement actions and can even involve the Department of Justice. The complaints of the borrower can even lead to private litigation against the servicer. If the same servicer is found to have several complaints from different borrowers against it, even costlier action lawsuits could ensue.
Common Complaints of Borrowers
Once the lenders and mortgage servicers realize the grave consequences a poor borrower experience can bring to their business, they would look for ways to turn things in their favor. To this end, they must understand the borrowers’ complaints. The pain points of borrowers are many and varied, and touching upon each of them is an extensive process. The following list is a compilation of the three most common but serious complaints that borrowers usually have. They also speak volumes about things lenders must avoid while dealing with customers.
The importance of efficient communication in business is known to all, but the mortgage landscape does not stand as an example of it. This is perhaps the most common complaint in the entire mortgage lifecycle. In the current situation where the borrower is already under massive financial stress, good communication is the first thing they expect from lenders. However, most lenders and service providers have always run operations understaffed, and as a result, their customer service suffers. Borrowers have to go through countless inconveniences such as long calls, unanswered emails, and mismanagement of services request cases. Another source of concern is the inefficient communication within the lender’s side, where the typical real estate agent complains that when the loan officer doesn’t communicate well, the former becomes the individual in the crosshairs of the borrower.
Borrowers have to go follow extensive documentation formalities right from applying for the mortgage loan to the loss mitigation and foreclosure procedures or until the dues have been paid in full. It is a tedious process in itself as the borrower needs to make extensive arrangements to gather documents such as bank statements, tax returns, pay stubs, etc. All the while, they have to in constant touch with the lender or the servicer, making the whole process time-consuming. Also, instances of document misplacement or loss by the lender add to the frustration of the borrower. The entire process is also characterized by claims related to inaccurate, falsified, or missing documentation.
Almost every process and sub-process of the mortgage cycle is marked by roadblocks that stretch it to the level of annoyance for the borrower. Whereas most of these roadblocks cannot be avoided when pursuing closing, what adds to the difficulties of the borrowers and real estate agents is the apparent communication gap. Real estate agents and borrowers find it troublesome when there is no communication of the loan status until the loan is no longer salvageable in the original timeframe. Although most lenders and servicers are aware of this and are making sincere efforts to streamline things, they usually under-deliver, owing to the process gaps and inadequate resources.
Besides the three major concerns, other problems plaguing the lender-borrower relationships include payment terms, disposition of collaterals, legal perspective, lack of clarity regarding program eligibility, and several others.
Steps to Improve Borrower Experience
Customer experience has always been a critical metric for the mortgage industry. But it’s a tragedy that even after sincere efforts toward improving borrower experience, lenders still lag in multiple areas and the borrower continues to expect more from them. This is why lenders need a strategic approach to address the problem. Below is a five-point list that should give lenders and mortgage servicers a head start to turn things around.
A Consistent Point of Contact
This is already a requirement as mandated by federal regulators. Lenders must arrange a single point of contact, at least on the servicing end of the business, to ease things out a bit for the borrower. This allows the borrower to connect with a single individual during the mortgage lifecycle for help or support. It offers a secure method for establishing contact between the borrower and the lender, an easily accomplishable feat with a technology-based portal.
- The borrower appreciates when the lender integrates different information systems, granting them access to a range of mortgage service activities with a single log-on.
- Offering the same look and feel across departments helps lenders in their efforts of upselling and cross-selling.
- Offering borrowers a consistent process for managing the different types of documents increases customer satisfaction.
Gather Borrower Data to Tailor Experiences
A well-designed survey of borrowers in a portfolio usually provides crucial information about their experience. Such a survey must be planned and structured meticulously to collect data on specific touchpoints in the mortgage servicing process. Besides external data, the existing internal data from CRM, chats, emails, and other sources must be analyzed to gauge how representatives interact with borrowers. The next step is to leverage technology, such as data analytics, to discover crucial patterns in the current borrower journey and identify ways to improve those.
- Gathering data from outside of the lending organization contributes to a more complete and detailed picture of the borrower experience.
- Data analytics can be applied to discover the intricacies of different borrower experiences, such as loss mitigation processes and monthly payments.
- Customer journey maps developed using analytics identify the different phases, touchpoints, and desired outcomes of each mortgage process.
Outsource Mortgage Processes to a Competent BPO
Outsourcing has always been a lifeline for the mortgage sector, and in disastrous times like these, the importance of mortgage BPOs is further underscored. Improving borrower experience requires meticulous effort and considerable resources, things that are difficult to manage for lenders, more so when the majority of the staff is working remotely with reduced productivity. Mortgage BPOs assist their clients in managing surges in loan requests, reducing cost per loan, and building and maintaining a loyal customer base. They help lenders to efficiently manage high-volume and tedious tasks in loan processing, underwriting, accounting, post-closing, title ordering, and others.
- Outsourcing mortgage back-office tasks enables the client to focus on improving their relationship with customers.
- While the customer engages with the lender, the outsourcing partner leverages digital technology to streamline workflows, accelerate loan processing, cut down on errors, and boost productivity.
- The external partner expedites the decision-making process and helps the lender deliver high accuracy, improved efficiency, and reduced turnaround time, to win customer approval.
As the Covid-19 pandemic draws to an end, the mortgage industry can see new and exciting opportunities heading its way. Enhancing the experience of the borrower throughout the mortgage lifecycle is a crucial part of preparing for the post-pandemic era. Adhering to the points touched upon above would give lenders the desired edge in the market to lead the competition in the foreseeable future.
Who We Are and What Makes Us an Expert?
Expert Mortgage Assistance (EMA) is a leading provider of mortgage support services in the U.S. Over the last decade, we have served global mortgage businesses with end-to-end customer support activities, helping them to deliver superior quality services and maximize their bottom line. We understand the mortgage workflows inside-out, and our industry professionals, equipped with the latest digital tools, make us a reliable partner for mortgage back-office tasks for global players.