The CFPB’s stated mission to make consumer financial product markets work for Americans by ensuring they “get the information they need to make the financial decisions they believe are best for themselves and their families.”
Almost 50 years before the federal agency embarked in its customer-focused mission and the nation’s servicers started to struggle with borrower communication issues, the second largest fast food hamburger chain in the world that hosts over 11 million visitors every day has been practicing the “Have it your way” customer service idea. The brand’s statement reads: “You have the right to have what you want, exactly when you want it…We may be the King, but you my friend are the almighty ruler!”
Martin was not surprised attendees packing the room at the 7th annual SourceMedia Mortgage Servicing conference in Dallas found the comparison amusing, if not far-fetched, even though servicers, too, are customer centric and affected by brand image.
Which is why, he said, servicers need to define their relationship with the borrowers “in customer terms, not in mortgage terms.” They have to organically adjust and offer multiple communication options that suit the changing preferences of modern day customers. “Delivering a better customer experience can result in positive financial impacts and brand image.”
It is not just about complying with the CFPB, he argued. Keeping open the lines of communication with borrowers is a challenge mortgage servicers have to embrace today to comply with regulators but also to help improve customer satisfaction rates and rebuild customers’ trust. It can start with effective communication, he said, “particularly during onboarding, to prevent problems and improve the customer experience.”
Servicers are faced with two realities. Federal regulators look at mortgage servicing practices through the customer’s lens and expect mortgage servicers to constantly communicate with customers. Borrowers on the other hand expect to be reached by financial service providers using all available methods: print, phone, email, social media. They prefer to choose how and when they can be reached by their lender or servicer, not the other way around.
Financial service providers are dealing with a borrower culture that is very different even from that of customers a few years past, Martin said, so the culture of the financial world has to change as well. In the new world the most efficient strategy for servicers trying to align best business practices in borrower communication with CFPB guidelines and regulatory requirements, is upfront due diligence and a different type of involvement.
Findings from a recent J.D. Power and Associates study show key servicing performance indicators reflect best practices that are directly applicable to CFPB guidelines. Overlaps include CFPB’s guideline to deliver periodic billing statements to borrowers with the best practice of making it easy for customers to find information on their billing statements and sending bills and receiving payments using customer’s preferred method. Similarly, CFPB’s requirement to provide error resolution and require additional information from borrowers, coincides with best practices where servicers aim for first contact resolution, clearly communicate fee structures, escrow calculations applied to the loan, and offer an escrow analysis guide.
Clearly, the CFPB guidelines are based on the industry’s best practices that ultimately have a financial impact on the servicer and brand image impact that lasts for years. Data show problem calls represent from 20% to 50% of all calls to servicers. As a rule mortgage-related problems and related costs can be significantly reduced if servicers take default prevention measures and try to improve first contact resolution practices, Martin said.
The image impact is real and quantifiable. J.D. Power and Associates data show that retention levels and brand loyalty are crucial to the borrower-servicer communication and problem reporting by homeowners. Up to 73% of these borrowers would recommend their servicer to friends and family. Meanwhile customers with low levels of commitment to their lender and servicer brand “are almost twice as likely to indicate having a problem.”
Only direct communication with borrowers can enable a servicer to detect what problems have the greatest impact on loan performance, he said. It helps servicers find the root causes of mortgage default, define sustainable workout strategies when necessary and in the process comply with the CFPB. Among others, the agency requires that lenders and servicers deliver periodical borrower alerts, making continuous communication a challenge for servicers and their third party service providers, Martin said, but on the upside, it also is the best venue to rebuild borrower trust.
Effective customer problem management today has to be a 360-degree framework that can capture product problems across all mortgage channels from origination to servicing, he said. The report shows average overall customer satisfaction in the past 12 months was impacted by issues with loan modification, at 23%, and website access problems at 20%.
The brand image ratings and company culture has an impact on overall customer satisfaction rates. For example, data show in 2011 an estimated negative impact of nearly seven points in the customer satisfaction index, once brand image is factored in.
It is not news that the CFPB is changing the industry. By and by it is becoming clearer how the mortgage banking culture is going through “a distinct shift,” at the senior leadership level that is on the avant-garde of embracing the new customer culture, he noted.
Now top managers are having monthly meetings to discuss customer complaints and CFPB compliance. “As they gather more customer centric information and try to improve customer relationships, banks are reassessing their value proposition to the customer in times when even charging checking account fees has become an issue…banks are searching for a new value proposition for these customers who are used to getting free checking for instance.” They are changing the mortgage banking culture, too, he said.