Opinion

Why Your Technology Must Put Borrowers First

 

The lending game has changed and everybody is well aware of that now. It's certainly very different today than it was when I got into this business many years ago. In the old days, lenders were primarily concerned with getting good deals done that were then sold quickly into the secondary market. Not anymore.

The new federal regulator, the Consumer Financial Protection Bureau, has changed the rules; a lot of them, in fact, with many additional rules still to be written. Executives in every segment of the mortgage industry are wondering if their systems, processes, and people are changing with the times. It a question they should be asking.

Among the biggest changes to impact lenders has been the new focus on customer satisfaction throughout the mortgage transaction. CFPB director Richard Cordray has on more than one occasion made it very clear that this is what the government wants; listening and responding to consumers is central to the Bureau's mission. And they've made it very easy for consumers to let them know when they're not getting the satisfaction they feel they deserve.

To this end, the Bureau leans heavily on information technology to engage consumers, encouraging them to report their experiences with financial institutions, and making it easy for them to do so on the CFPB website. All of this information is captured, processed, and managed in the Bureau's robust, public Consumer Complaint Database. How are consumers responding to this invitation to provide experiential feedback? By the end of the third quarter of 2013, the Bureau disclosed that over 139,000 complaints had been registered with the CFPB. Over 50% of those complaints relate to the mortgage finance industry.

The raft of new rules, coupled with the newfound customer satisfaction mandate, and the potential for wave after wave of complaints that must then be investigated and resolved, means mortgage bankers must likewise turn to information technology as the foundation for their CFPB compliance operations. Here are a couple of reasons why every lender needs to make a substantial investment in automation that will serve the consumer.

1. Compliance demands require it. While the CFPB has never come out and said that lenders must invest in new technology, the Bureau has made the rules so complex that any lender who hopes to scale its mortgage operation will be forced to employ new technologies. Why can't they just use the old tools? They can't because the legacy systems were not developed to meet the needs of the borrower. Rather, these systems allowed mortgage lenders to process loans for the secondary market in an expedient manner.

Old technology doesn't contribute to high levels of customer satisfaction. How do we know this? Given the fact that satisfied customers will become repeat customers and refer other business, we can assume that any banking executive interested in growing a thriving mortgage business would have employed their tools to guarantee high levels of customer satisfaction. That has never happened here. In fact, J.D. Power & Associates, during their annual customer satisfaction surveys, have consistently ranked the mortgage industry lower than most other businesses. This leaves us to conclude that either mortgage executives aren't smart enough to know that customer satisfaction matters or they simply didn't have the tools to deliver it.

Executives that we speak to every week exhibit significant interest in technologies that provide better experiences to their borrowers. This is good, because the federal regulator is paying attention. Recently, CFPB deputy director Steven Antonakes said in a speech he delivered to the U.S. Chamber of Commerce that the Bureau receives nearly 4,300 complaints every month about mortgage-related issues.

The federal government will demand that mortgage lenders provide consumers a positive buying experience. It's not just about truth in lending anymore. It's not just about getting the numbers right on the good-faith estimate and the HUD-1. It's about having customers take away from their mortgage transaction an understanding of the process, a belief that their investment of time and money was worthwhile, and that their lender and its loan origination, production and underwriting personnel treated them fairly and equitably in every aspect of the transaction.

This is a tall order on many levels. Lenders have never staffed for customer service and it's unlikely with the low profit per loan being reported by the Mortgage Bankers Association that they’ll be in a position to afford it. The only solution is automation. Lenders must employ technology that will help their smaller staff deliver a better experience to the borrower.

2. Serving more consumers faster. With compliance and personnel costs rising and profit per loan falling, having happy customers is not enough to guarantee a profitable operation, even with the downstream benefits that come from satisfied borrowers. Lenders must also employ technology that will allow them to satisfy more customers in less time.

Loan officer compensation has been a huge issue over the past year and lenders now find themselves in a position where they can no longer tie their best originator's compensation to their production, unless they do so in exactly the same manner they do their less productive originators. It's more important than ever that lenders use technology to make it as easy as possible for the best loan officers to move qualified borrowers into the pipeline and on to processing.

Part of the solution involves identifying those deals that won't qualify as early in the process as possible and moving them out of the qualified mortgage pipeline. Technology can make it easy to determine how the loan should be processed, alerting the loan officer quickly so the news can be delivered to the borrower immediately. Knowing sooner, rather than later, contributes to higher levels of overall customer satisfaction, even when the news isn't great. The other part involves providing timely status updates, which we know is vital to increasing customer satisfaction.

Lenders that forego automation and continue to use manual methods to sift through the borrowers that come in to them during a purchase money market, will quickly find themselves overwhelmed. They won't be able to keep up and their customer satisfaction scores will fall. When that happens, more complaints will appear inside the CFPB offices. And they'll get audited. The CFPB has made clear that the consumer complaint database is used to identify patterns of potential violations among lenders, prompting targeted audits by the Bureau.

Perhaps worst of all, they stand to lose their best loan officers to firms that provide the technology they need to close more loans and make more money.

The tools do exist today. Lenders should choose new automation technology for loan origination, production, underwriting, and servicing because the new tools exist now and they are better than legacy systems. Older systems have not been successful in delivering high levels of customer satisfaction in the past and there is no reason to believe that they will be in the future.

The new tools are being built from the ground up with the consumer in mind. They provide ways for borrowers to take some control of the process, which is a departure from so-called borrower portals of the past, which served more to confuse and annoy borrowers than offer them control. Like many other legacy systems, these are technologies that pretend to serve the borrower, but without actually doing so. These tools will not make lenders more successful in the future.

In the future, successful mortgage loan originators will have to look at all of the technologies they use and make sure that they serve the needs of the borrower and not just their own firm and investors. The tools should provide timely information that is as easy to understand for a mortgage applicant as it is for the loan officer or processor. The tools should provide quick status updates and an easy way for the borrower to get in touch with a human inside the lender's shop when they need to.

Of course, the best technology will provide enough information to the borrower that they don't have to call into the lender's shop at all. When that happens, technology will serve both the lender and the borrower, increase scores for customer satisfaction and increase the bottom line profitability of the mortgage lending operation.

 

Sam Kaddah is CEO of bFocused, Independence, Mo. His company produces the Liquid Logic LOS, which comes with a robust borrower portal. Sam can be reached at sam.kaddah@bfocused.net.

 

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