The Key to Borrower Happiness: Communication

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BLOG VIEW: Poor communication is often an underlying cause of the mortgage borrower complaints that flow into the Consumer Financial Protection Bureau’s (CFPB) consumer complaint database, a recent review of the data shows.

As such, having a clear focus on educating the consumer can help mortgage companies better manage borrower expectations and allow them to spend less time resolving these complaints.

In the first quarter alone, there were 6,574 mortgage related complaints submitted, with a staggering 93.7% closed without any action taken. The lesson for mortgage lenders is that simple misunderstandings leads to more complaints than company errors.

Worth more inspection, however, is the remaining 6% of complaints that did result in some action taken on behalf of the consumer. What is the root cause for these complaints – and how were they resolved? In general, a borrower who understands the mortgage process is happier – and a servicer that helps them understand the process is more successful.

Let’s take a look at the source of some of these recent complaints – and how better communication could have been used as a solution to prevent them from occurring.

Complaint: In the first part of this year, mortgage-related ramifications from Hurricane Harvey were the most common type of mortgage complaint. A majority of these complaints were from borrowers who were surprised that, at the end of a disaster related forbearance period, they were expected to bring their loan current. Additionally, distraught consumers didn’t understand that they would need bank sign-off to pay contractors for repair work.

Solution: Many of these disaster-related complaints that were closed in favor of the consumer noted that the borrower did in fact receive a letter from the bank explaining the process. However, to the borrower, the letter was misleading. Mortgage companies need to better educate customers during these times of hardship with multiple points of communication throughout the process. Disasters like Hurricane Harvey are devastating and consistent contact with borrowers means a great deal for a mortgage company’s brand, as well as consumer satisfaction.

Complaint: The second most recorded complaint in the first half was related to private mortgage insurance (PMI), and the appraisal needed to remove the PMI. Customers are often surprised that in some cases they are required to pay for the appraisal, or are upset that after obtaining their own appraisal, the bank requires them to use a specifically bank approved appraiser. Borrowers can request to cancel their PMI once the loan-to-value ratio (LTV) hits 80%, however per the Federal Homeowners Protection Act of 1998, lenders are only required to cancel the insurance at a 78% LTV.

Solution: Undoubtedly, mortgage companies notify borrowers about the process involved in removing PMI. However, additional contact with borrowers is needed to ensure that process is followed and to avoid confusion. Based on these complaint narratives, it is clear that customers mistakenly believe that their PMI will be automatically removed, and when this doesn’t happen they resort to submitting a complaint online. This continues to be a common point of borrower confusion across the industry.

Complaint: The process around paying off a mortgage. The narrative in these complaints reveals that the customer did not receive a refund for the money in their escrow account, the lender did not record the deed timely, or the lender did not provide the borrower with information about who their tax collector is.

Solution: Unfortunately, these complaints highlight that the bank processes are not consumer friendly when a mortgage is paid off. An escrow refund can often take upwards of 60 days, which oftentimes is not quick enough for customers. To steer away from this situation, mortgage companies need to speed up this process or communicate with borrowers on the timeline of events. Otherwise they will continue to submit complaints about this process shortly after their final mortgage payment.

The common theme in these complaints is that borrowers are misunderstanding the process. Sure, they are notified about each of these processes when they first obtain their mortgage, but banks need to maintain clear and consistent communication as each of these events come to fruition. Mortgage borrowers are already anxious about the process, which is still doggedly perceived as a mysterious black hole of paperwork. Servicers can address these pain points with effective, meaningful and timely communication to make the process work seamlessly for all parties involved.

Travis Casillas is a senior business intelligence analyst at LERETA, a provider of tax data and services to the mortgage servicing industry.

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