Customer Dissatisfaction With Servicers Is Growing

Data show mortgage servicers are not meeting their customers’ expectations. And negative brand image perceptions may further deteriorate as disheartened borrowers cannot take advantage of historically low interest rates and see no clear housing and overall economic recovery in sight.

Inability to refinance is one of the drivers of frustration among homeowners who originated their mortgages during the peak of the housing boom, according to the J.D. Power and Associates 2011 U.S. Primary Mortgage Servicer Satisfaction Study. The overall customer satisfaction with primary mortgage servicers declined 29 points on a 1,000-point scale from 747 in 2010 to 718 in 2010.

Satisfaction declined across all four areas of the mortgage servicing experience evaluated by Westlake Village, Calif.-based J.D. Power and Associates: billing and payment process, escrow account administration, website and phone contact.

Friendly service and reliability were the two key aspects of overall brand image for mortgage servicers that declined most notably in 2011 compared to 2010. Customers whose loans were originated between 2006 and 2008 when home values peaked and credit standards were the most lax are “significantly less satisfied” than they were in 2010.

David Lo, J.D. Power and Associates director of financial services, told this publication that as shown across all J.D. Power financial services studies what has changed in the past five years is the banks’ fee structure. Non-mortgage fees charged by banks have become “much more common” and a major factor of discontent. The mortgage servicing market debt collection structure on the other hand consists of very few sets of late fees so customers did not experience that same higher incidence of service fee growth.

What is not that obvious, according to Lo, is that most customers do not make a clear distinction between the mortgage originator and the mortgage servicer.

For example, he said, customers who use the same bank for credit card, automobile, mortgage and other lending “do not exactly separate their feelings if they are unsatisfied in another area.”

Data show customers’ discontent with banks increased in the past decade proportionately with fees they charged on their non-mortgage accounts.

Lo says it is possible albeit not easy to dissect the overall customer discontent with financial service providers to measure dissatisfaction directly linked to mortgage servicing, despite the fact that “customers think of banking all together.”

The deterioration is significant even though the 2011 mortgage servicing satisfaction index model was adjusted to reflect the removal of the fees factor, which was part of the 2010 index score—otherwise the satisfaction level would have been even lower.

Add to that perceptions related to the macro economic market developments and the reported abuses committed by mortgage servicers against homeowners, and the mortgage servicing brand perceptions deteriorate even more.

So beyond fees, unfavorable refinancing and modification loan terms, customer perceptions and emotional behavior also affect customer satisfaction.

According to Lo, the challenge in mortgage servicing is the very low-touch relationship nature of the business. One side effect of banking automation that allows for automatic mortgage-payment options has lead to minimal servicer-borrower contact, especially compared to other banking activity related to credit and debit cards.

He argues that when “there aren’t as many touch points,” people fill in the blanks, including brand perception, with feedback “that is macro in nature,” generated by the media and inevitably results in emotional responses to a given situation.

“In this study more than in the other studies that I have worked on, a lot of perceptions are shaped by factors that are not necessarily under the direct control of the bank, or brand itself, because there are all these macro factors that affect them.”

The study finds servicers who tend to focus on borrowers underwater or in distress need to renew their focus on a large number of non-delinquent borrowers who are equally distressed as they struggle to stay current on their mortgage due to job loss or other reasons and need assistance to prevent default.

Lessons learned from best loss mitigations practices that count on door knocking, face-to-face communication and the now-required one-point-of-contact approach may help improve overall customer satisfaction with servicers.

As a rule, Lo argues, borrowers who routinely exchange information with their financial advisors in writing, via email or by phone, shape their perceptions about a financial servicer provider based on the information received.

Yet the high-touch, one-point-of-contact assistance that is now the norm in loss mitigation is costly and very difficult to implement across the board in mortgage servicing.