Did you have a sibling who was always misbehaving, dominating your parent’s attention, and making you feel like an afterthought? That’s not unlike the situation the average mortgage borrower finds themselves in, according to J.D. Power‘s 2015 U.S. Primary Mortgage Servicer Satisfaction Study.
“A lot of time and resources have been spent on the live representative interaction to help distressed borrowers. While improvement is needed, the majority of mortgage customers haven’t seen a lot of meaningful changes in their experience” said Craig Martin, director of the mortgage practice at J.D. Power. “Mortgage servicers must ensure that all customers’ concerns receive the appropriate attention in customer experience management decisions.”
When the real estate bubble burst in 2007 the default rate on mortgage loans rose to unprecedented levels. With such a high volume of unpaid loans and increasing foreclosures, mortgage servicers were forced to put nearly all their resources into collections, loss mitigation, lawsuit settlements, and complying with a new regulator, the Consumer Financial Protection Bureau (CFPB). Lost in the shuffle was the borrower who, while perhaps tempted by the Siren’s song of a strategic default on their underwater loan, somehow managed to keep the wax in their ears and their payments up to date.
Fast forward eight years and the default rate has dropped back to historic norms, but many servicers are still operationally oriented toward supporting the increasingly rare distressed borrower. This means the customers in good standing go begging for answers when they have questions on interest rate resets on ARMs, adjustments to their escrow accounts, or heaven forbid, entering a full repayment on the home equity line of credit (HELOC) that piggy-backed on their original note back in the go-go days.
From the mortgage servicer’s perspective, the option to focus attention on their best customers isn’t available. Despite the reduction in delinquent loans, the regulatory task list for dealing with distressed borrowers is only growing. This leaves little budget to be more effectively engaging with the performing borrowers. But as the J.D. Power study shows, that perspective may be short-sighted.
A small investment in more effective self-service capabilities would go a long way toward improving the customer experience, particularly when dealing with the occasional but often confusing irregularities that can arise in the life of a loan. Take, for instance, the payment adjustments required to maintain the escrow account for tax and insurance. If either – or both – of these obligations increase, the borrower will be required to make a larger monthly payment. The sooner the borrower is notified, the more likely they will be able to adjust their budgets accordingly. Just as important is explaining the whole concept of the escrow account. Neither of these communication efforts needs to add expense or burden on the servicing staff still focused on default prevention.
Automated solutions that proactively engage borrowers with interactive voice messages, emails and text messages can alert borrowers to the upcoming change in their payment for mere pennies per message. Interactive voice response systems, websites and mobile applications can be enhanced with the ability to understand and respond to questions like “What is an escrow account?” or “Why is my payment increasing?” without forcing the borrower to search the servicer’s static FAQ page, or speak with an expensive customer service representative.
Giving borrowers the tools to easily serve themselves will raise their satisfaction. Next time they need a new loan, a better experience could make all the difference between a kid who runs away from home and one who stays and keeps making their bed.