Online Servicers Score Higher
A recent study shows that servicers are engaged in a hit-and-miss relationship with borrowers whose lender satisfaction levels ultimately affect the bottom line.
According to the 2007 Primary Mortgage Servicer Study released by J.D. Power and Associates here, mortgage customers who made at least one late payment in the past 12 months say lenders "are slightly more flexible" in scheduling late payments, but tend to be less understanding and accommodating of their specific circumstances compared to 2006.
The biggest finding, Tim Ryan, senior research director of the finance and insurance practice at J.D. Power and Associates told NMN, is that electronic availability makes borrower experience more satisfactory.
"Lenders can support the majority of these customers by being even more considerate," advises Mr. Ryan. "These circumstances often lead to the development of valuable, regular-paying customers."
The study finds highly satisfying customer experience translates into financial benefits for lenders "including increased referrals and higher customer retention rates." For example, doubling the retention rate compared to the 2006 industry average of about 14% can result in an increase of nearly 3% in mortgage servicing valuations, or approximately $38 million for lenders with a $100 billion portfolio.
Furthermore, Mr. Ryan said, "Moving customers to high commitment levels can triple the number of recommendations, almost double the number of additional products that the customer utilizes and reduce marketing costs for generating new business."
Venues to achieve higher retention rates, he said, "first and foremost" include convenient online billing and payment processes and reduced errors. Mr. Ryan told MSN it also is important how one looks at the thousand-point scale index model.
"There are a number of different things in the curve but people are more satisfied when they have electronic communication, either in terms of getting their bill, the mortgage amount they'll have to pay, communicating with a servicer, or actually making the payment," he explained.
Granted online research means participating customers tend to actively use that medium, he said. The study takes different approaches to one issue to ensure statistical accuracy, so respondent preferences are statistically valid across universe of homeowners serviced by these lenders. Satisfaction is measured against data from years past on electronic payment options, billing and communication.
The study is based on three waves in November 2006, February 2007 and May 2007. It rates 39 primary mortgage servicers -- who represent over 75% of the market -- for which 11,481 participating homeowners completed surveys. The study measures customer satisfaction with the whole process of servicing a loan based on account administration, billing, payment and direct communication or contact with the mortgage servicer.
Highest in overall customer satisfaction was Branch Banking & Trust with 860 points, followed by M&T Mortgage with 828 and Citizens Bank with 825.
The slight decline in satisfaction in 2007 appears mainly in the area of problem resolution since delinquencies or late payments went up during 2007 vs. last year. "More people are making late payments and that to some degree will impact their satisfaction level," despite servicing, he said.
"We also saw that the percentage of people contacting servicers went down substantially. Last year, 30% of the participating homeowners contacted their lenders, this year that dropped to 26%." Within that decline, he said, the number of people who contacted the servicer concerning some kind of a problem was about the same as the previous year. Mr. Ryan believes the decline reflects the general decline in mortgage activity within the industry from 2006 to 2007.
The study found customers who appreciate the option to have automatic mortgage payment deductions have about twice the retention rate of other customers. Also, customers who are contacted by lenders via regular mail, get fewer additional products with that lender than those who contact the lender using e-mail or the Internet. The reason, he said, is that it facilitates and makes it more productive to cross-sell loan products, compared to regular mail.
The study shows borrowers who utilize escrow accounts are more satisfied with the lender, compared to those who do not use them.
"It's a convenience factor, which typically is the choice of the lender, not the borrower, but you have a higher satisfaction rate when the lender handles the payment of taxes and insurance," he said.
Also the study found that customers who say they "definitely will refinance" with their current lender are most likely to be the ones who make monthly payments via the Automated Clearing House method, which allows the lender to take payments directly from the customer's bank account. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com