Compared to the origination side of the industry, mortgage servicing is failing to meet best practices on a consistent basis, the 2010 U.S. Primary Mortgage Servicer Satisfaction Study from J.D. Power and Associates reveals. The rough spots, unsurprisingly, are most often related to loans in loss mitigation, as opposed to performing loans.
‘In day-to-day servicing, I don't think there are any areas where servicers are severely lacking,’ says David Lo, director of financial services at J.D. Power and Associates. ‘I think the processes where servicers are going to be severely lacking are the loss mitigation or loan modification areas, only because it's kind of a new thing that's taken off in past years. A lot of servicers, particularly with the volume, were caught off guard.’
The major pain points, according to consumer feedback, include servicers' failing to explain the modification process and failing to provide and meet time frames for approval. Repeat requests for information were also a sore spot. About 80% of borrowers in loss mit were asked for information more than once, as opposed to only about 28% of consumers who were repeatedly pinged for information during loan origination.
‘People who are behind and going through the process of a loan modification – that's still a pretty painful process,’ Lo says. ‘A lot of the things we identified as best practices are not being met in servicing, or certainly not to the level that they're being met in origination.’
On the performing side of the house, customer-service levels in the 2010 survey were similar to those in recent years, J.D. Power and Associates found. Servicers were ranked based on five factors: fees, billing and payment process, escrow account administration, website, and phone contact. Billing and payment and escrow administration, which Lo calls the ‘key factors’ of the study, stood out as being particularly problematic. Some of the bad marks could be erased by better communication, Lo observes.
For example, the timeliness of payment posting plays into borrower dissatisfaction. Borrowers who make payments late in the monthly cycle often opt to submit their payments online. Many servicers' systems, however, do not allow payments to post until 24 to 48 hours after a borrower submits the payment, meaning an online payment that is technically made on time will result in a late fee. Too often, servicers fail to communicate the payment lag to borrowers, which, Lo notes, is ‘not received warmly’ by borrowers.
‘The really important thing is to communicate that,’ he says. ‘If you're going to have a lag, make sure people are aware of it. Some servicers do a better job of that than others, but that can be a potential sticking point.’
Alternative payment options, such as payment by phone, can also carry hefty fees that are not always made clear to borrowers. Lacking clarity around these considerations ultimately results in a higher cost-to-service for servicers, Lo says, because disgruntled or confused customers will phone in to servicers' call centers. Customer-service representatives, in turn, end up spending their time explaining mundane business practices rather than helping sort the backlog of borrowers who need to be steered toward loss mitigation.
The same can be said of mistakes made in escrow administration, Lo adds.
‘The way I see mortgage servicing is, you need to have a problem-prevention mind frame,’ Lo says. ‘You want to make sure things are accurate and communicate information appropriately on the statement. Mistakes on statements or mistakes in escrow can cause somebody to call or reach out to a servicer, and that's when servicing becomes more expensive.’
The benefits of having a highly satisfied customer base are clear. Satisfied borrowers are more likely to be loyal customers, meaning a shop that has an origination business stands a better chance of retaining borrowers during the refinance process.
‘And when you have that good relationship, the ability to cross-sell is much higher, as well,’ Lo says. ‘Think about bank servicers. Their ability to wind that relationship into a checking account or a home equity loan – even investment services – is much higher among the highly satisfied customer group.’
(Please address all comments regarding this article to John Clapp, editor of Servicing Management, at firstname.lastname@example.org.)