J.D. Power: New Rules Affect Servicing Customer Satisfaction

It is not easy to bridge the gap. Source: ThinkStock

New business practices mandated by regulators in an effort to reform the primary mortgage servicer market appear to have leveled off large versus small bank differences in customer satisfaction, according to the J.D. Power 2013 U.S. Primary Mortgage Servicer Satisfaction Study.

Apparently, the Consumer Financial Protection Bureau and the national mortgage settlement have been decisive factors in the overall increase in customer satisfaction with primary mortgage servicers from 725 in 2012 (on a 1,000-point scale), up to 733 in all four mortgage servicing experience factors reviewed: billing and payment process, escrow account administration, website and phone contact.

But the study also finds that as customer satisfaction with large national servicers improves year-over-year alongside their efforts to improve performance in compliance with new regulation, “overall satisfaction with some smaller national servicers that have performed well above average in previous studies has shifted toward the industry average.”

This leveling off, said Craig Martin, director of investment services at J.D. Power, could be the result of an increase in new clients combined with a new set of rules released by the CFPB effective January 2014.

As to whether it means the performance of small size servicers busy with January compliance challenges will improve enough for them to remain competitive in the new marketplace, the answer is not necessarily simple, Martin told this publication.

Efforts to comply with CFPB rules are going to impact all firms by way of requiring investment of time and resources, he said. However, “given the historically strong performance of many of the smaller firms” it seems likely they would be competitively positioned to abide by the rules without suffering any performance consequences.

Another factor, is the high volume of refinancing customers over the past few years, which can increase the total servicing population, and “can put a strain on resources” that may particularly impact smaller firms. Most importantly, “customers that switch mortgage firms bring in a set of prior experiences and expectations, especially if they maintain their banking relationship elsewhere which typically results in lower satisfaction.”

The CFPB requires mortgage servicers to ensure their general systems, policies and procedures are fully compliant with the CFPB requirement they provide the appropriate information and support to customers, he explained. And since the J.D. Power study reviews the effectiveness of servicing practices from the customer’s perspective, he said, continuous improvements in customer satisfaction “seem to indicate that changes being made in response to these new regulations are having a positive impact on the experience of customers.”

The national mortgage settlement agreement reached in February 2012 between 49 state attorneys general and the country’s largest mortgage servicers also led to changes the way Bank of America, CitiMortgage, JPMorgan Chase, Wells Fargo and Ally service loans and measures that aim, among others, to end dual tracking, improve communication with the borrower and appoint a single point of contact during workouts.

SPOC is one example marking substantial improvement in the communication between lenders and servicers with distressed borrowers facing loan modifications and foreclosures. Overall satisfaction among customers who had a single point of contact is 154 index points higher than those who worked with multiple representatives. At the same time servicers may benefit by avoiding multiple contacts regarding the same topic.

Currently, Martin notes, only the top five servicers must abide by the terms of the settlement, but these large increases in customer satisfaction scores suggest new policies governing communication, particularly SPOC, “might easily become the de facto standard for problem resolution across all mortgage servicers in the near future.”

According to the study, escrow account administration scores also indicate the importance of improving communication because they are among the most difficult aspects for customers to understand. Hence, a 21-point increase in satisfaction from 2012, “the largest increase among the four study factors,” indicates straightforward communication about escrow accounts is critical for servicers.

These results, Martin explained, are a direct result of “an increase in the use of escrow analysis guides” that explain to the borrower how an escrow process works indicating that “by being more proactive and using various methods to provide information to borrowers” servicers will see even higher levels of customer satisfaction.

Currently Branch Banking & Trust Co. is at the top of the customer satisfaction ranking among primary mortgage servicers for the fourth consecutive year, with a score of 765, despite a 38-point decline from 2012, followed by Regions Mortgage with 764 and SunTrust Mortgage with 762.

And BBT is a small size bank that prides itself in combining personalized service with online presence, the combo most of today's consumer look for in a bank.