It hasn’t been that long since the mortgage industry worked through the challenges of the early part of the century and now, once again, we find ourselves in a time when serving our customers is filled with financial hardships and uncertainty about the outcome.
Just like we can look back and analyze how our industry rebounded from the Great Recession, we will one day be able to do the same regarding the COVID-19 pandemic. At that time, the book will be open, so to speak, on how mortgage servicers responded to the situation. Now is the time to determine if your servicing operation will be known as one that was there for their customers during a very difficult time – providing empathy, care and fully informed options – or simply one that ensured payments were made on time.
While 2020 was a productive and lucrative year for mortgage lenders and loan originators, it was not nearly as positive for millions of Americans who ran into financial difficulties because of the impact that the pandemic had on the economy. Jobs were lost, or significantly cut back, and small businesses around the country were forced to close or limit their business hours, forcing many homeowners into the unfortunate position of choosing between making their mortgage payment or putting food on the table for their family. Thankfully, the option of forbearance provided time for these families and our economy to recover.
Data at the end of 2020 from the Mortgage Bankers Association showed Fannie Mae and Freddie Mac loans in forbearance decreased to 3.26% while Ginnie Mae loans in forbearance decreased to 7.68%. But despite these improvements, more borrowers had once again started to seek relief with new forbearance requests reaching their highest level since the beginning of August. Roughly 1.8 million homeowners were also seriously delinquent on mortgage payments at the end of the year, according to data from Black Knight.
Of the borrowers nationwide who entered forbearance programs with their respective servicers as early as last spring, a healthy percentage have successfully exited the programs and returned to making regularly scheduled payments. However, another portion of the population has received one or more extensions to their forbearance. The extensions are indicative of the likelihood that those customers experienced a more permanent financial impact. That could mean a variety of things – someone’s position was eliminated and it won’t be restored, someone’s weekly hours were permanently cut or perhaps someone lost their job and found a new role that doesn’t pay as much.
These are real issues that many borrowers throughout the country are facing through virtually no fault of their own. Servicers and investors need to have solutions and alternative options in place for people when they ultimately come out of forbearance – particularly for those families whose household income levels are lower than when their loan was originated.
That is why it is imperative, perhaps now more than ever, that mortgage servicers approach their business and their customer relationships in a very empathetic manner, despite the financial toll these forbearance solutions can take. The mindset needs to be on giving customers choices, informing them of the options and helping them regain and sustain affordable homeownership.
This can be a difficult decision for servicers because of the upfront costs that are required to bring these programs to life, but it is the right thing to do. It will make a difference for our customers – and our businesses – in the long run.
An incredible evolution has taken place in the servicing space in recent years, and the pandemic has provided yet another opportunity for servicers to step forth and lead through the challenges, with customer experience guiding our actions. Servicers have come a long way from the days of simply sending statements and collecting payments. Greater effort is made to take a more accountable role in creating a customer experience that allows the customer choice and options on how to best manage their home.
Sure, part of the day-to-day customer experience for servicers will always include the basics, like sending payment reminders, checking balances, keeping escrow balances in line and making payoffs available conveniently and accurately. But there is more to it than that.
Borrowers should not only feel they can trust and rely on their mortgage servicer, but also count on them to add value in managing their home. Whether it is adding value by creating multiple channels of connectivity or sending reminders on simple household maintenance tasks, servicers should continuously be looking for new ways to help their customers be successful in creating long-term sustainable homeownership.
Servicers must aim to treat their customers in such a way that creates lasting relationships and extend themselves to provide additional financial services and products for their customers in the future. It starts by listening to the customer and understanding what they want and expect from their servicer. By meeting and exceeding their expectations, servicers earn the opportunity to gain their next loan, and hopefully continue to grow their business through referrals from happy customers.
2020 was a bittersweet year in housing, as mortgage companies thrived with record volumes during a time of such financial discomfort for many of the customers within their respective servicing portfolios. Servicers that center their service model on delivering the best possible customer experience by helping their customers regain and sustain homeownership today can feel good about more than doing the right thing. They can also reap the benefits in the long run by distinguishing themselves from their competition and setting themselves up to win big through future referral business.
When you look back on the COVID-19 pandemic and related housing crisis, how confident will you be that you cared for your customers and created opportunity for affordable and sustainable homeownership? The answer will likely be revealed in the long-term success of both our customers and our companies.
