J.D. Power and Associates recently published its 2011 study of consumer satisfaction with primary mortgage servicers. The results, perhaps unsurprisingly, weren't great. To delve into the specifics, as well as discover the areas where servicers might improve, MortgageOrb this week sat down with David Lo, J.D. Power and Associates' director of financial services.
Q: Compared to 2010, consumer satisfaction with servicers declined in all four of the main categories studied by J.D. Power and Associates. Is there a silver lining to be found anywhere?
David Lo: "What we're seeing is an overall decline, but a lot of the decline is not driven, necessarily, by specific operational things. A lot of it is perception-based. It's general growing dissatisfaction, because one of the big things we talk about is people who are stuck in their mortgages, predominately people who originated between 2006 and 2008. Those people are becoming more frustrated, and when we compared last year's study with people who originated in '06 through '08 and then this year's study with the same group, their satisfaction levels were much lower than if you compare people who originated in 2009 or even 2010.
We're thinking they're more dissatisfied because they're seeing interest rates at historic lows, but they're trapped, in a sense, because either their loan-to-value ratio is way too high or their credit isn't any good – or both, and they can't refinance. Part of it is unfair to servicers, because it's usually outside of their control. That negative perception is being carried over to the servicers that we studied.
We also see a couple of the key brand-perception metrics have declined as well. So those two collectively have an impact on satisfaction. So while things operationally – like making sure your statements are accurate, that your not misassigning payments, that people understand their escrow – are still important, it's not like those things have declined dramatically in perception. It's a lot of the macroeconomic things that are driving the declines that we're seeing.
There's definitely still a clear relationship between customer satisfaction and servicers' operations. For example, if somebody doesn't understand how their escrow is calculated or there's a mistake in their escrow payment, those are clearly dissatisfying. Or if someone has a problem and they call a call center, and that interaction doesn't go smoothly, they have to wait in line or they don't understand the person they're talking to, those things are definitely negative to the customer experience.
Q: What characteristics do the report's highest-ranked servicers have in common?
Lo: One, they're very operationally sound. They seldomly have mistakes, such as errors on account statements. They do a very good job of communicating across various channels.
When you think about your mortgage, you have to communicate what your payment is, what your escrow is, how those calculations are calculated, and how those payments are made.
The better-performing firms have guides they send to customers explaining how these things work, how their escrows are calculated. It's not something that everybody understands right away. It's particularly confusing when people receive a statement in the mail saying their payment is going up. In many cases, it's going to be because their taxes increased, or something like that. Being able to explain that to people is very important.
Other characteristics of good performers include communication of fees – not necessarily just late fees, because everybody charges those, but making sure people understand how they're charged. For example, if a borrower wants to make a payment on a website, some servicers charge for that. If you want to make a payment over the phone, there could be document fees. When the better-rated servicers do charge fees, they make it clearly understandable and aren't surprising customers with them.
From our perspective, we're never going to say, "You shouldn't charge a fee for this or that." That is purely at the discretion of these servicers themselves. But what we would say, in every case, is that you have to always effectively communicate that to people and make sure they're not surprised by them. That's the big thing.
Another characteristic we see is using things beyond your traditional communication methods. In the mortgage industry, people have been mailing things for years. But the better-performing servicers have a higher percentage of people going to their website for information. When you think about providing information on things like fees and escrow, the more channels you provide them, the more opportunity you have to communicate that information.
Q: How much of servicers' worsening brand perception should be attributed to last year's robo-signing scandal?
Lo: A lot of that negative perception is going to be driven by the media. The bigger banks have the biggest challenge there. The big brands – Bank of America, Citi, Wells Fargo, Chase – have taken a beating in the media. There are a lot of things driving that, but when you think about perception, even though the majority of people in the mortgage space haven't been affected by robo-signing, there is going to be a negative halo caused by the negative media attention being placed on it.
Q: As you've alluded to, the 2011 study illustrated the frustration of borrowers who are unable to refinance at today's low rates. What steps can servicers take to improve consumer satisfaction among this specific consumer base?
Lo: It's tough. There are things the government is doing – the Home Affordable Refinance Program, for instance – but it seems there is much more focused being placed, legitimately, on people who are truly in distress and are already delinquent. There's been a lot of focus placed there, and you can debate whether that's been successful or not.
For servicers to educate people as to what their options are would be one place to start. A lot of times, when people call for options, what consumers don't have a very good idea of is that there are a lot of groups out there that say they can help somebody. But not all of those groups are legitimate or even ethical, and helping consumers sift through that is beneficial. Bank of America has recently established centers in different regions in the country that help counsel people.
