As anyone who has read my column knows, I'm writing primarily about conversion this year. It's what matters today and will become even more important in the near future. That doesn't prevent me from going astray from time to time.
Last week, for instance, I talked about dealing with complaints (like those lodged by my wife when the utility company turned off our water). Before that, we all got a bit distracted by the marketing master stroke played by Quicken Loans.
Now that the water is running again and the chance to win a billion dollars has slipped away, perhaps we should refocus our attention on the way successful mortgage companies will be making money this year. It's all about conversion. We last spoke about conversion from the perspective of the loan underwriter. I have to say, I got some interesting feedback.
Some of the feedback I got from professional underwriters was to be expected, pushing much of the responsibility for satisfaction to the front line originators for taking bad apps, and to processors for completing the paperwork in a slipshod manner and thus putting time pressure on the underwriting department to fix everything by deadline. That happens. For sure.
We also heard from some underwriters that many firms were marketing their products to the wrong borrowers, leading to problems. That happens, too.
My point was that everyone, including the underwriter, has an impact on customer experience and denying that means you are no closer to addressing it. The good news is that I have gotten a lot of feedback on this series, and I am happy to engage in such debates (In fact, if you have comments on any of my stuff just message me on LinkedIn or put comments on this page).
But for now, let's assume that the company has done the marketing, the loan officer has taken a good loan application and the loan moved on to the underwriting department and has been completely processed. If all of those things happen the way they should, the loan will move on to the closing table, which is where many people think the process ends. In fact, I am defining conversion as the successful completion of the opportunity into a closed loan. So, isn't the closing the end of the process? In truth, conversion is just as important at the closing table as it is at any other point in the process, and here is why.
In the worst case scenario, failure to effectively convert a borrower at the closing table can result in the loss of the deal. Admittedly, this doesn't happen often because many borrowers don't have the luxury of just walking away.
Many have already committed to selling their current home and moving. They have a contract and they need to close. But even if they don't walk away before signing the closing docs, they can still walk away angry. That does not serve the lender well.
The biggest reason borrowers walk away angry is because they don't have a good idea of what to expect at the closing table. In fact, in our research on customer satisfaction with the mortgage process, we see a common pattern where satisfaction drops when expectations are not met.
We all share information about the expenses borrowers will face at closing, but we sometimes think of this information from the mortgage banking perspective. If we're off by $40 on a particular fee, it's not a big deal to us as long as we are still within GFE tolerance.
One of the major differences between the upfront GFE and the final HUD-1 is often the escrow estimates—sometimes that is because the taxes may not have been known, or have recently changed. Or perhaps it is because the tax bill just became due and the due date was not well known at application. Or maybe the loan originator has no clue what an aggregate escrow analysis is, and the only cushion they were aware of is the cushioned seat in the car they drive to meet Realtors.
These sorts of changes are not examples of a lender trying to rip off a borrower, but the borrower may feel like they are being ripped off anyhow. If the numbers aren't accurate, and changes are not well explained, they may feel cheated—even if it's not the lender's fault.
Providing information upfront to the borrower, along with an accurate cost to close, is the best way to make certain that your borrowers are walking away from the closing table as satisfied customers. But the closing table is actually more than just an opportunity to build stronger relationships with your borrowers. This is an excellent environment to protect yourself and strengthen your referral partnerships.
When I was a loan officer, and later as a retail manager, I always encouraged loan officers to go to the loan closing, to be there in person, if possible. There are some very good reasons for this. The first is, and I've seen this many times, if the loan officer is not in the room when the loan closes, then the lender will magically become the cause of everything that goes wrong. And things often go wrong, at least in the minds of the borrowers.
By being present, it's much more difficult for a closing agent to put responsibility for a problem back on the lender. (I know not all closing agents would throw an LO under the bus and I expect some rebuttals from the title crowd. Remember, find me on LinkedIn.) The standard answer from closing agents is that "the lender was late getting us documents." While that is true sometimes, it certainly is not true all the time. But I bet it's the standard explanation when the lender is not sitting in the room with a chance to defend themselves.
The second reason I tell LOs to attend the closing is because it is an excellent opportunity to show borrowers that you care about their commitment to enter into a new 30-year relationship. You may be surprised to learn that borrowers appreciate this and if you've done your job right, you'll see it in their eyes when they thank you and shake your hand.
You'll also see the joy that comes to Realtors when they collect commission checks. It's good to be there when that happens because it reinforces in their minds the fact that you are a good partner to have. It also gives you a chance to give them a Kleenex while they cry tears of joy as they get paid money to cover last month's Jaguar payment. (OK, that was snarky, but it had been whole paragraphs since I inserted a joke.)
I know that most loan officers will tell me that they simply don't have time to attend every loan closing. But we know at Stratmor from analyzing lenders' data that the typical loan officer closes four or five loans per month. Are you sure you don't have time to make it to four meetings a month to prevent being blamed, and perhaps get more referrals?
It's also true that it can be very difficult for lenders that sell direct to consumers to have a representative everywhere they close a loan. But even if they can't be there in person, there are things you can do to make that closing special for your borrowers and partners. It may be your last best chance to convert a mortgage loan borrower into a referral and repeat business generating machine.
The loan closing isn't the end of the game, unless you let it be the end of the game. There are many reasons why you should not. Next time, we'll talk about what should happen immediately after your loans close.
Garth Graham is a partner with Stratmor Group, and has over 25 years of mortgage experience.