Customer service 2.0.Technology has been the one of the prime movers in transforming the mortgage banking industry. It has altered the process of originating and servicing loans, and it has enabled consumers to become more involved and empowered during the process. Unfortunately, technology has also facilitated other types of behavior that has led us, as an industry, down the wrong path.
Before looking ahead, I would like to take you back 30 years on a journey in time. It was a period before most of today's technological advancements impacted our industry. One might say it was the good old days.
As hard as it might be to believe, when I first started in this business, many of us baby boomers signed forms for our first home that were created on a typewriter. That is unthinkable today. Somehow, there also did not seem to be as many forms to sign. It all seemed pretty simple. Even our choice of mortgages was limited. At that point in time, there was very little loan product variety. If you did not want a Federal Housing Administration (FHA) or Department of Veterans Affairs (VA) loan, they came in one flavor--a 30-year conventional product requiring 20 percent down.
Loans used to be originated one at a time through a manual paperwork process. After the loan was closed, the information was collected at a loan administration center and offered individually or in small packages to savings banks or other investors solely located in the United States.
Soon the complexity of loans grew, product variety widened and the number of forms multiplied. Help arrived in the form of the electric and programmable typewriters. Suddenly, some of the fields of information would be automatically entered on closing documents, saving additional time.
As we all know, computers changed the speed of work on both the originations and servicing sides. Not only was documentation generated quickly, but automation also revolutionized how loan servicing was performed. Today, there are also automated underwriting systems that have changed the approval cycle and how loans are made available to the secondary market. With the creation of the government-sponsored enterprises (GSEs) and the advent of mortgage insurance, 90 percent and 95 percent loan programs began to be offered.
The most dramatic change to our industry has been the ability of technology to shorten loan processing time, allowing companies to handle an incredible volume of loans that would not have been possible even 15 years ago.
On the servicing side, there are vast changes where technology has really driven down the cost of servicing loans and provided a greater degree of benefit over the years. Servicers have become so efficient with the use of technology that loans can be serviced for just a few dollars. The advent of automatic dialers, voice messages and e-mail has further reduced the costs associated with collections.
In terms of the secondary market, great strides have been made in terms of speed, loan product complexity and loan volume. Suddenly, very large pools of loans could be offered. Technology enabled these loans to be stratified and offered at different payment speeds with numerous risk layers.
Borrowers have benefitted significantly from the advancement of mortgage technology. This is especially true in terms of the pre-approval and approval processes. This certainly was not the case 15 to 20 years ago. In fact, I remember waiting for that phone call that would tell me if I was approved or not. It seemed like a lifetime before I heard anything.
It took so long because there had to be a full credit report (which took days to get), as well as verifications of deposit and employment. And then there was the wait for the appraisal to get done. All the pieces had to be in place with a formal under-writing process. Now, the Internet has accelerated access to all the background and credit information needed on a borrower. Technology has eased the minds of consumers and given them loan pre-approvals that they can leverage as a bargaining chip when making an offer on a house.
While technology has made the industry more efficient and yielded significant cost savings and higher production, the bad news is that it has completely changed how many customers are treated. In the rush to grab ever-expanding market share over the last five years, the concept of excellent customer service was often lost.
In order to understand how things have changed, let's once again take a step back in time by about 30 years. Back then, loan officers were personally attuned to their customers' needs. First and foremost, they wanted to put their customers in mortgages that they felt were affordable. The primary objective of the mortgage industry was to create life-long customers by spending more time with them and providing personalized service. And product choices were very few, so it was far easier to make the product-customer match.
Some of you reading this article may even remember the time when the vast amount of customer leads for mortgages came from Realtor[R] referrals. The real estate agent served as the gatekeeper for the homebuyer. Realtors were accountable for nearly 75 percent of all first-time homebuyer mortgage referrals. The borrower was, on average, less financially sophisticated than a Realtor.
For instance, the borrower may not have had the knowledge of a Realtor in order to discern whether he or she was getting the best price and the best service from an originator. This knowledge gap was really based on the fact that the borrower was either a first-time buyer or one who had only dealt with the loan process every five years or so. In contrast, Realtors handled several properties and numerous loans each year, so their in-depth expertise served as a compass to guide borrowers down the right path.
This gave Realtors the ability to pick and choose the loan officers who would receive customer referrals from them. The criteria were clear--it was all about service. Competition was fierce, so the loan officers who got the bulk of the business from Realtors were the ones who made themselves available 24 hours a day, who returned telephone calls quickly, and who provided the highest levels of customer service. If you were not willing to perform at this level, then you did not get Realtors' business.
In the current real estate market, this dynamic has virtually disappeared. With the advent of the Internet, individual borrowers have become savvy in terms of doing research about rates and fees. They also feel comfortable enough to go directly to the lenders to start the mortgage process. Despite educating themselves and attempting to gain more control over the process, the gap between technology and personal service sometimes leads to poor decision-making. This is understandable, given the complexity and vast array of loan products available today.
However, the increased reliance on technology by both the mortgage industry and consumers is not wrong or bad. It just so happens that while technology adds the benefits of instant response and greater accessibility, it also seems to contribute to a greater sense of impersonal interaction throughout all aspects of the cycle. It seems inevitable that we have tended to move away from face-to-face contact due to more telecommuting roles and increased roles and responsibilities. What seems to have happened is that because technology has allowed us to take on more tasks, we are busier than ever and have lost sight of the value of personal contact.
Unfortunately, in some ways, technology has led us down that path of losing touch with our customers. Automated underwriting engines were created, and limited-documentation loan programs fueled that fire. Bad habits and questionable decisions ensued because technology placed a physical gap between the mortgage company and the borrower. Not having to look the customer in the eye seemed to make it easier to not deliver everything the customer needed, or to just not fully understand what the borrower needed.
A passion for commissions replaced the passion for the customer. Operating on fast-forward caused us to forget about what it was we should be valuing the most. In some ways, we allowed technology to replace accountability to our customers.
This is an opportune time to evaluate how to return to basics while still leveraging the best that technology has to offer. These challenging times underscore the importance of creating a loyal list of consumers who, because of your high level of customer service and because of their confidence in your ability to put them in the right and most appropriate mortgage, will return again and again.
Leading the cause for a back-to-basics philosophy in our industry is the prevailing theme of positive change that has been introduced with the advent of a new president. In his inaugural speech, President Barack Obama said that this was the time for all of us to pick ourselves up, dust ourselves off and look to the future. He stressed that it would not be easy and that it would take time.
I would like to propose that the mortgage industry be the first to take that giant leap ahead by proactively constructing a back-to-basics approach. This means leveraging our past approach of highly personalized customer service and combining it with the advantages of what technology has yielded for a set of best practices designed to win back customers for life.
Today, we can have the best of all worlds. This is a time of transformation. Let's evaluate how we do business and make technology work on every customer's behalf even if this means spending more time on each loan. By doing so, we can be confident that we have done everything possible to ensure that borrowers can stay in their home and remain as our life-long customers.
As part of a new best-practices approach, creating beneficial homeownership experiences should be the priority of everyone in our industry. As I've said before, it should also be the measuring stick for a new performance-based commission structure. This strategy should be centered on the long-term objective of sustained growth. While technology provides the tools that effectively handle the details of a transaction, the mortgage industry still must rely on master craftsmen to use those tools in a way that achieves our primary goal of lifelong homeownership for all.
I suggest that all of us in the mortgage industry embrace the basics of service and integrity before we let technology run our businesses. We must understand where technology can provide the advantage--such as the ability to measure loan performance throughout a loan's life cycle as the backbone of the new performance-based commission structure--and where the human touch must prevail.
After all, technology will never replace a knowledgeable and trustworthy loan officer. Computers will make us more efficient, but they will never understand the nuances of human behavior and unique situations that make every borrower different. Therefore, our industry must focus on training loan officers to work as consumer advocates so that they enhance borrowers' experience and win them as customers for life. Only then will our performance reach a standard of excellence that will restore trust in our ability to help people achieve the American dream of homeownership.
By John Robbins, CMB
John M. Robbins. CMB. is a former chairman of the Mortgage Bankers Association (MBA). He served as chairman and chief executive officer of American Mortgage Network Inc. prior to its sale to Wachovia in 2005.