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Dealing with Mortgage Emergencies

JUL 23, 2014 5:14pm ET
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Last week, I started telling you the story about my family’s recent experience in the local emergency room. The story is illustrative of the many similarities between what consumers experience in that environment and what they experience in ours.

It was also a great opportunity to continue to earn points with my family members by telling potentially embarrassing stories about them. My wife was thrilled at finally being an inspiration for one of my columns, but my wife's role in the column was just a secondary benefit. The real benefit comes from recognizing how we make consumers feel, because today, according to our federal regulators at least, that’s what matters.

I also got a lot of feedback on last week's column, some of which contained very thoughtful questions about my wife’s health. She’s doing fine, thank you very much. Apparently, some readers thought that I should have taken a full week off and actually skipped the writing of the column to help my wife convalesce after her ordeal. We have some very thoughtful readers here at National Mortgage News.

So you don't think I am totally insensitive, I would like the record to reflect that she is doing quite well now. Also, my wife is tough—after all, she has lived with a mortgage banker for 25 years, so she has experienced her share of ups and downs—and ups and downs...and downs and ups. She has also lived with my sense of humor and so she knew in advance that I would tell this story and even mentioned it in the hospital. So, it was her idea.

So, back to our story. As I outlined last week, she was forced to wait a full three hours to get help at the hospital with a total lack of updates. However, she was finally seen, and then the hospital personnel (who were very nice and very capable) did figure out the issue and admitted her to the hospital. So, she moved from emergency room to an admitted patient and the problem was cleared and she was home a couple of days later. We are, of course, very thankful for that. But it points out what happens in our industry, too.

You see, the source of frustration that we experienced was waiting to be seen, and we are guilty of that with nearly every loan file we process. In the mortgage business, we follow a sequential process with each step performed by some level of specialist. So, we have a loan application first and then we submit that loan to the next stage. Then we do disclosures, then we order the appraisal, then we submit to underwriting, then we answer questions, etc. Now, in each stage, there is typically a series of work to be done before the next stage can even begin.

At Stratmor, when we analyze processes for clients, we call this "staged gates"—each step in the process is part of a stage that must be completed before the next part begins. So, an example in mortgage banking is that, until the appraisal comes in, we can't have an underwriter review the tax returns. Why is that? Because the loan is not ready to submit to underwriting yet. That makes it easier for the lender, but it creates a series of bottlenecks where loans get caught up until they are ready for the next stage. That is exactly what happened to my wife—until a bed was available, emergency room personnel couldn't see her, and until they could see her, they couldn’t even start to administer drugs. Thus, you stay in pain.

That is a bad process, and does not address how the customer expects to be treated. If the homebuyer finally makes copies of his entire tax return, why can’t you look at it? Well, there are two primary reasons for that. The first is that the systems we use are not typically equipped to have more than one person working on a loan at the same time. And most LOS systems do not break the entire process into tasks, and then have the tasks queued for those who are able to handle the task.

There are not many lenders who break the process into steps in this way, rather they break it into stages where multiple tasks need to be completed before moving the file forward. So, the next stage is not even started until all the tasks for the previous stage are complete. This is a big reason we have so many last-minute surprises because data, documents and requests sit and wait until they are all ready for review by the next person in line.

The other reason, beyond the system issue, is resources. Like a hospital, we also employ people who are highly competent, highly compensated and a scarce resource. In fact, I learned in college that economics is the study of how you allocate scarce resources (the previous sentence hereby concludes what I learned in college. Just kidding, but for a more advanced economic perspective, please see my partner Matt Lind who has a Ph.D. in the discipline.)

Anyhow, there are scarce resources in a hospital, doctors, specialists, nurses. In our industry, they include underwriters, compliance management, credit management, and even some of your more talented processors.

There are never enough of these people. So, we create artificial gates to queue up the loans (or, in a hospital, to queue up the patients) so we can hopefully better leverage the high cost talent more efficiently. However, that creates its own vicious cycle when you factor in customer satisfaction, because failing to execute the process effectively means consumers are less likely to use that service again. And that means you are less likely to make money from them, and it's also less likely that they will refer friends to you for other opportunities. And when that happens, you may have very effectively managed a resource today but created a situation where you will not have future revenue to retain that resource in the future.

The issue we face is that all of the people who interact with the consumer before these people get involved, personnel who are for whatever reason considered less talented, are the ones who may have more influence on whether the consumer will exit the transaction satisfied or not. So, if you want to guard your carefully managed resources, and you don’t have the system to more efficiently manage your workflow, then you need to have everyone else be highly committed to over communicating with the consumer.

Managing these people effectively is the key to higher customer satisfaction. This is where the hospital failed my family. It's where we often fail, too.

Had the hospital employed more people in the admitting office who were trained in empathy, communication, setting expectations and letting us know what was going on, we'd have been much more satisfied with the experience.

It's no different here. The best lenders use all the tools they can. They text you status updates while you're waiting for an answer. They call you proactively before you call them. They even ask you upfront how often you'd like them to give you a status update. “How about I'll call you every Friday and give you a status, or would you prefer I text?” They provide online options that enable you to get a status.

All of these things would have been great in the hospital. If we knew we were 4th in line, we’d do much better than knowing we were 14th in line. None of which they told us and all of which ultimately became drivers that determined how satisfied we were with the outcome.

Information is currency. It was true for us that night in the ER and it's true for every mortgage borrower. Setting expectations and then delivering as agreed will go a long way toward achieving the satisfaction levels we need to see in our business. More on this—and a very interesting story about my dog—next week.

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

Comments (7)
I couldn't agree with you more about the need to proactively communicate the status of a loan application, or modification for that matter. If you don't, then the anxious borrower is going to call you, which can frustrate them if your call center is busy and your front end systems (IVR or auto attendant) difficult to navigate. It's much better to beat them to the punch, reach out and let them know where they are in the process. Then if they still need to speak with someone after getting the status update, your reps will be able to serve them much more quickly (especially if your inbound systems can prompt them with a greeting that says "are you calling about the status update we just sent you?").
Posted by Brian M | Thursday, July 24 2014 at 12:13PM ET
Poorly written article with the comparison of a hospital experience--complete with silly asides--to describe the loan experience. Lost opportunity.
Posted by Catherine C | Thursday, July 24 2014 at 2:07PM ET
"....Had the hospital employed more people in the admitting office who were trained in empathy, communication, setting expectations and letting us know what was going on, we'd have been much more satisfied with the experience....

and herein lies the challenge in both industries. Imagine a processor making 50 phone calls (her pipe) every friday to provide updates..and answer questions? the LO is updating RE agents often with the same "its in process" , in UW, appraisal is back, etc. for a smaller shop its 1 FTE just to accomplish this basic follow up. Can it be automated? My experience is that telling an agent or borrower "you're in UW" generates another quesiton "how long" then another 2 days later. Realtors do not understand nor borrowers the concept of a "pipeline". Without pipeline discipline the process breaks, and quickly!
Posted by john m | Thursday, July 24 2014 at 2:21PM ET
Love this topic.....What if every mortgage bank owner or person responsible for their lenders processes became aware of how rediculous our industry operates and see how willing our industry is to accept medicority.....the dreaded staging process. That would be the first step in fixing many problems.

I am realizing that many lenders think the answer to operational efficiency will come from hiring/promoting with-in their organization. Problem is those 'insiders' are already indoctrinated and blind to new/different or better ways of workflow.

I would love to learn about what lenders you have been able to shift their approach away fro the staging process and what the results have been.
Posted by Brad Y | Thursday, July 24 2014 at 4:07PM ET
Brad, John and Brian - thanks for your comments. I also think that the parallels are valid.
Catherine - sorry you did not like this one. I can't really tell from your comments what you did not like. Good news is that I write a new one every week, so I will try to do better.
Posted by Garth G | Thursday, July 24 2014 at 4:29PM ET
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