HAMP Lessons: Borrower Contact Is Out, Borrower Engagement Is In
If it’s possible to learn from one’s mistakes, the current wave of loan modifications and its unexpected consequences could turn us all into geniuses. Never before has the servicing industry been so inundated with borrowers looking to adjust their mortgage terms, payments or loan balances. Nationwide, more than 400,000 modification offers have been extended through the Obama Administration’s Home Affordable Modification Plan, or HAMP. MOS Group alone has worked with over 60,000 borrowers within HAMP, and each transaction has been an education process in itself. MOS Group has learned many lessons from working with so many borrowers, but probably the most important lesson of all is that simply adding staff in hopes of handling the ongoing demand for loan modifications doesn’t really solve anything – in fact, it may even make matters worse. We’ll get into the details in a moment. First let’s talk about the challenges. No one could have predicted the myriad of challenges that have emerged within the HAMP program. One of the biggest early surprises, and one that continues to grow daily, is the immense number of calls from borrowers who are actually current with their mortgages. These are not borrowers that have fallen behind and are facing imminent foreclosure. They’re individuals who have kept up with their payments and simply want to know if they qualify under the government’s plan. The deluge of phone calls from these borrowers has placed an enormous burden on servicers’ front end systems. Industry wide, customer service representatives are struggling to provide these current borrowers with clear answers, which can be particularly challenging if the borrower does not qualify under HAMP guidelines—many borrowers hang up, unsatisfied with the answers they receive, only to continue their efforts by calling back a week later. Another surprise is the tremendous amount of time that servicers need to spend communicating and interacting with borrowers throughout the HAMP process. We’ve learned that it takes more than a couple phone calls and letters to complete a HAMP loan modification. In fact, some servicers are experiencing eight to ten calls from each borrower from the time a borrower is qualified under HAMP until the modification is completed. Borrowers, meanwhile, are struggling to understand the milestones within the HAMP process and are not sure how to provide the information and documentation required. Eager for status updates, many of these borrowers try to figure things out on their own by calling their servicers for updates—problem is, for some borrowers this means calling every day. On the other side of the issue, there are a large number of borrowers who falsely believe that entering the HAMP program with a reduced trial payment means that they do not need to do anything else. These borrowers tend to stop responding to calls and letters, which in turn produces an added burden on the servicer, who now needs to expend the time and effort it takes to proactively resume contact with the borrower. At first glance, these challenges seem easy enough to address. After all, it makes perfect sense to address the problem of high in-bound and out-bound call volume by simply adding more staff. This is where servicers can take the wrong turn. While additional staff members are certainly needed, simply throwing bodies at the problem can actually exacerbate the issue. Servicers need to remember that when it comes to loan modifications, they’re dealing with what will eventually be a fully underwritten loan. Loan modifications involve a lot more than simply inputting a new set of numbers. These transactions are intricate, complex, and have a lot of requisite paperwork to complete and validate. In other words, a staff member without industry knowledge and a deep understanding of HAMP could potentially do more harm than good. When looking to supplement their staff, servicers need to understand that not just any staff member will do. Any employee hired to interact with borrowers should be not only be experienced in the mortgage process, but also knowledgeable about HAMP as well. Only then will servicers have the chance to effectively manage the high volume of calls that are coming in, while reducing the numerous additional calls that follow when inaccurate or incomplete information is relayed to the borrower. Inexperienced and unknowledgeable staff can unknowingly delay the process and cause customer service levels and efficiencies to plummet. Servicers and vendors need to hire knowledgeable and experienced mortgage professionals that can engage borrowers in the loan modification process and communicate and manage expectations for the borrower throughout the modification period. In other words, it takes a lot more than a friendly voice answering a phone to solve this issue. Servicers and their outsourced vendors need experienced, knowledgeable professionals that can engage borrowers in informative, two-way communication. They need to invest their time and resources in educating borrowers, not merely answering phones. When borrowers are not adequately informed about HAMP loan modifications and how they work, the number of inbound calls that are made to the servicer increase. From the very start, staff members need to stop simply contacting borrowers, and start engaging borrowers. They need to clearly explain the process and manage borrower expectations. This not only helps minimize unnecessary contacts, but also reassures and calms the borrower, and saves valuable time and money in the process. It’s an issue of an ounce of prevention being worth a pound of cure. Staff members that understand the nuances of a mortgage transaction as well as the specifics of HAMP programs, can set the borrower on the right path from the very first phone call. For example, under HAMP, loan modifications require an escrow. Many borrowers are not aware of this requirement. Customer service representatives that understand what an escrowed loan is can explain to a borrower how it works, and how payments are affected. As it stands, the average customer service representative may struggle to handle these calls. It’s no wonder borrowers are confused and calling multiple times.