When borrowers face the threat of foreclosure, they often do not know whom to listen to and what offer to respond to. Today, borrowers are inundated with calls from their servicers, solicitations in the mail for more loans, and infomercials offering to completely eliminate their debts.
In a bewildering and confusing landscape, borrowers understandably want to speak with someone they can trust – someone who can help. They are often embarrassed, nervous, uncertain, suspicious and perhaps even resentful. They want to speak when it is convenient for them and require mutual undivided attention.
Borrowers are confronting a complicated landscape, as are servicers. Servicers have always had to comply with an array of regulations, such as the Fair Debt Collection Practices Act and Telephone Consumer Protection Act. But increasingly, servicers must also track and stay compliant with emerging state- and even county-specific regulations that govern communications to borrowers. Examples include Massachusetts House Bill 4387, as well as regulations from Maryland, the city of Philadelphia and others.
With such heightened media and government attention to the mortgage crisis, it is more important than ever to deploy innovative strategies to best reach delinquent borrowers.
The industry needs to be sensitive to borrowers and their preferred modes of communication. A borrower's individual preferences, background, education level, payment history and delinquency stage typically have a substantial impact on their preferred method of communication. If a servicer acknowledges these preferences, the benefits can be substantial: better right-party contact rates, more promises-to-pay and better-performing loans.
The key to these outcomes is to have personalized communications campaigns targeted to each individual borrower. A harried executive with a cell phone and Blackberry, and a preference for e-mail and text messages, may respond differently than a rural homemaker with no home computer and a preference to be called at home after the kids have left for school. These borrowers – although they may be in similar financial predicaments – may respond very differently to the same communication effort.
Two important elements are at play: trust and control. Borrowers must come to trust that the servicer wants what is in their best interest. The building blocks of a trust relationship based on common interest already exist, because both the servicer and the borrower typically want the borrower to remain in the home.
However, borrowers must feel that their servicers listen to them and respect their preferences. This may be as simple as a borrower stating, ‘Please don't call me at work. I sit in a cubicle, and everyone can hear my conversation.’ That information must be captured, stored and acted on within the servicer's default servicing system.
Also, borrowers must feel some element of control. Clearly, the thought of being foreclosed on represents a significant uncontrollable event. So within the communications method and style, it is important that the borrow feels empowered to some degree. It may be simply allowing borrowers to provide required information via e-mail, through a Web site or by calling the servicer's call center – and allowing them to do so at a time convenient for them.
Another key driver for better outcomes is to actively study the influencing variables, channel preferences and payment histories of each individual borrower and craft a customized communications strategy that is both integrated and minimally intrusive.
The precise mix of phone calls, letters, text messages, update packages and e-mails must be driven by response behaviors and, equally important, they must be consistent with the servicer's overall communications strategy for that individual/customer segment. By being cross-referenced, your message as a servicer is subtly yet actively reinforced. In essence, you have a communication strategy tailored to an audience of one.
Some examples of integrated campaigns include:
- a borrower signs for a critical mailing, and a text message acknowledging receipt of the letter is sent back instantaneously;
- a borrower refuses a critical mailing or the mailing is undeliverable, which triggers an automated outbound phone call to determine if the address has changed or what else may have caused the refusal – with, perhaps, an automatic escalation to a skip-tracing service; or
- a borrower receives a non-intrusive text message with an identification code, offering to discuss loan modification options if the borrower replies by texting ‘# modification.’ The call is routed to a specialized toll-free number within the servicer's loss mitigation group and is identified as a high priority item in the call queue.
Borrowing best practices from one-to-one and direct marketing and applying it to servicing is proving useful. Concepts such as recency-frequency and monetary impact analysis can be very effective in tying together your mail, phone calls and loss mitigation strategies. Integrated marketing, mass personalization and interactive marketing have all matured in the last decade, powered by technologies such as customer relationship management systems and pioneered by companies such as American Express and Nordstrom.
Clearly, in the mortgage world, there are more stringent legal boundaries of dealing with borrowers in the delinquency process. That fact, coupled with the policies and contingencies within pooling and servicing agreements, make for a more challenging situation.
However, loss mitigation leaders will have to think creatively about how to meet all these requirements while still communicating relevantly, building trust and enabling control with borrowers.
Chris Redmond is with The Walz Group, a California-based company specializing in mail management solutions and related outsourcing services. He can be reached at (951) 491-6805.