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Converting Disappointed Borrowers into Evangelists

MAY 28, 2014 6:10pm ET
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Last week, I wrote about some of the insights we're getting when we look closer at customer satisfaction in the mortgage industry. This week, I want to bring the conversation back to what will surely be the word of the year—at least in our business—conversion.

Now, I have already written about seven articles on conversion and some of you may be thinking that I am treading old ground, but this week is about a critical point after the closing, when you need to be sure to close the loop on the customer's perception and really learn from what the customer says.

Also, it often takes several mentions of a concept (such as conversion) to get someone to change—and so my effort to keep talking about conversion is really about getting industry participants to change the way they look at the topic.

One of the most difficult conversions for lenders to accomplish is turning a past customer into a future customer. It often does not happen. There are a lot of reasons this is true, but one reason your borrowers don't come back to your bank for another loan is dissatisfaction with their experience on the last one.

And that is pretty hard to overcome years later when they are back in the market for a new home, but may just be possible if you have a good outreach strategy right after they just closed on a home loan.

It's very easy to make fun of ourselves when it comes to borrower loyalty, because it doesn't exist. At least it hasn't in the past. Some lenders are out to change that and are doing a credible job. A more serious challenge for lenders is what I call anti-loyalty. It's a documented fact that a dissatisfied customer will tell many more people about a bad experience than a satisfied customer will tell about a good one.

Today, with the CFPB's public complaint database, it's easier than ever for unhappy borrowers to give a lot of people reason for not visiting your institution. And even if the customer does not go to the extreme of contacting CFPB, they might do something worse—tell their Realtor! Have you ever experienced the wrath of an unhappy Realtor who also relies on referrals for their livelihood?

In the old days, there wasn't much the industry could do about this. We had to accept the fact that some borrowers just wouldn't be satisfied. It was hard to know why, exactly, but it was viewed as a cost of doing business. Today, that cost is too high. Fortunately, there are things we can do about it that will minimize the risks associated with dissatisfied customers and increase the chances that they can be converted into satisfied borrowers who will actively promote your business.

Conversion here depends upon three things. First, you have to know when a borrower is dissatisfied (this is not as easy as it sounds). Second, you have to take the appropriate action at the right time. Third, you have to make it very easy for your customers to share what happened to them with others.

If you put a video camera in a closing room and record 10 different loan closings, you would be hard pressed to determine who was satisfied and who wasn't when you later reviewed the tapes. These are stressful events, at least for the borrowers. If they're lucky, they leave with a sense of accomplishment because they have a new home, but also three decades of debt.

More than a few have stumbled out of that room in a kind of shock. We need to know how the borrower feels about the transaction, but the closing room is not the place to ask. It's like asking an accident victim how they feel while they're still in the emergency room. Never good.

The right time to find out what your borrowers think about the transaction is after they've had some time to reflect on it. At Stratmor, we've found that the very best time to survey borrowers about their experience is about 48 hours after the loan closing. By this time, the borrower has had a chance to process it all and come to conclusions. When they do, about 10% will indicate that they are not happy. By communicating with them after the close, the lender is in a position to find this out.

Once you know who the dissatisfied customers are, you must take some action if you hope to convert them into more satisfied borrowers. Again, about 48 hours after the close is the right time to do this. The surprising thing is that, for many borrowers, the only action the lender needs to take is to listen. Some borrowers just need to vent and when someone from the institution listens with compassion, their attitudes change.

Often in sales, we teach the "objection response model" which is a way to connect with consumers about their objections and overcome them on the way to the sale. The same approach can work with unhappy customers after closing, using the classic "Feel-Felt-Found" method. "I understand how you feel, others have felt the same way, but they ultimately found that it was OK for this reason." (By the way, I used this technique for years with my wife until she figured out what I was doing when I tried to listen empathetically while watching a football game).

First, you empathize, telling them that you understand how they feel as they recount their story. This is a big first step, and when the right person from the "head office" calls an unhappy customer (soon after closing), it often defuses the situation just through empathetic listening. In fact, just by being willing to listen to the concerns of your borrowers, lenders can convert many of them into evangelists.

This won't work for every dissatisfied borrower. Some can't be converted with any means. For others, mistakes that occurred during the loan origination may have to be rectified. The bottom line is that it's better to work with your existing customers to resolve issues than to visit with the CFPB later about why your customers are filing complaints.

Having formerly dissatisfied customers converted to happier ones is nice, but the real value is when they tell others about the experience. Lenders can accomplish this by making it easy for their borrowers to share information with others, including positive messaging on social media. There are a number of techniques for this, some of which I will cover in a future column. Suffice it to say, you have to help them help you. And it's very profitable for you to do so.

Conversion is critical in any business, but for mortgage lenders who hope to get repeat business and referrals, converting borrowers who are less than satisfied with their experience may offer the biggest returns. Fortunately, with the right systems in place, it's not that difficult to do.

Garth Graham is a partner with Stratmor Group, and has over 25 years of mortgage experience.

Comments (3)
This is a very nicely written article, and thank you for posting!
Posted by Joseph H | Thursday, May 29 2014 at 12:24PM ET
Well said and good advice. I will be sure to pass along.
Posted by Patrick M | Thursday, May 29 2014 at 2:31PM ET
Thanks for the article. Yes practicing empathy and listening techniques with your wife is a good first practice but she will catch on pretty quick....been there!!!
Posted by Douglas E | Friday, May 30 2014 at 7:47PM ET
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