Improving customer service for commercial real estate borrowers.
The challenges in providing borrower customer service for commercial mortgage-backed securities (CMBS) loans is even more daunting, with multiple parties involved in credit-related decisions including the primary, master and special servicers; controlling class holders; and rating agencies.
CMBS securitization and loan documents also limit servicers' flexibility in what sometimes appears to borrowers to be unreasonable. Borrowers consistently complain about their ability to effectively make contact with their CMBS servicer.
Notwithstanding these challenges, it is critical for third-party servicers to find ways to improve customer service. Our business depends on borrowers and their willingness to continue to finance their commercial real estate properties with the loans that we service.
To some extent, commercial mortgages are a commodity product. Quality of service is not rewarded in servicing compensation. However, servicers can utilize high-quality borrower customer service as a way to establish an important and sustainable competitive differentiation.
Being responsive is fundamental to good customer service, and efficiency is critical to being responsive.
A borrower customer service program that is properly staffed, managed and monitored should not be more expensive than the alternative of providing mediocre or indifferent service. Improving responsiveness and efficiency in managing borrower requests results in better customer service and also can reduce the associated costs. The integration of advanced workflow technology and process improvement is an opportunity to improve customer service and reduce costs.
A strong and unwavering commitment from management and staff is a prerequisite to the implementation and maintenance of high standards of service. It is very important for management to identify and define what high-quality borrower customer service actually entails by activity. Standards for responses and turnaround times for specific activities should be established. Then metrics to measure performance must be developed and monitored and analyzed. You can't manage what you don't measure.
Quality commercial borrower customer service must begin when the loan is closed and continues until the loan is paid off. Setting the borrowers' expectations and providing easy access to information related to the loan and servicing activities is important. There are two major categories of servicing activities that must be addressed over the life of a loan.
The first is regular activities, which include receiving debt-service payments and required deliverables such as rent rolls, operating statements and financial statements, and updated certificates of insurance coverage. Servicers also provide borrowers with proof of payment of escrowed taxes and insurance, and Internal Revenue Service (IRS) forms 1098 and 1099.
The second category of activities is responses to borrower-initiated requests. These include a wide variety of activities, including reserve releases, lease approvals, payoffs, release of collateral, change of ownership, assignments, assumptions and other loan modifications.
These requests vary from routine to very complex, and the time associated with reviewing and approving them varies as well. Borrowers should have easy access to information about the approval process, time frames, approval parties, costs and what information is required to process the request.
Getting all the required information to process a borrower-initiated request is critical, and this is usually where there is a major bust in communications between the borrower and servicer. The problem gets exacerbated by ineffective back-and-forth email communications. Servicing and asset management staff should recognize the value of a telephone call as a more effective and efficient mechanism to address and resolve problems than extended email exchanges.
High-quality customer service should start with a personal welcome call in addition to a "hello" letter. The borrower should be provided with appropriate servicer contact information for specified activities.
The borrower should understand what deliverables are required and when, how to sign up and access his or her loan information through the servicer's online borrower inquiry facility and how to access borrower frequently asked questions (FAQs). Borrowers should also be provided with information regarding how to initiate asset management requests and what information is required for specified actions.
Establishing expectations early and providing ongoing reminder communications helps increase the borrower deliverable collection rates and reduce servicer follow-up, and the associated expense.
Technology and workflow management tools can be very effective in improving borrower customer service, particularly when coupled with process improvements. Borrower websites can provide access to detailed information on loan status, including payment history, taxes and insurance status, reserves and other pertinent information on a self-service basis without having to contact the servicer.
A checklist of required information for borrower-requested asset management activities, such as reserve releases or payoff requests, should be available through the borrower website. A further enhancement would be to track the status of these asset management requests through the borrower portal. Payments through an automated clearinghouse (ACH) facility and electronic funds disbursement authorization reduce borrower/servicer interactions and improve efficiency.
Servicers with a focus on improving borrower customer service are establishing personal representatives for important borrower relationships. This is an established construct for mortgage bankers and their portfolio lenders where the loan originator establishes personal relationships and maintains an involvement for the life of the loan, but is much less common in CMBS.
Master servicers typically purchase the CMBS servicing rights from the securitization sponsors and issuers, and do not have any relationship with the borrower. In some cases, that mortgage banker who originated the CMBS loan retains the primary servicing responsibility. Establishing these type of relationships with large, sophisticated and active CMBS borrowers is valuable in efficiently processing asset management requests, and helps the servicer establish a positive reputation for quality customer service. These relationships are also very helpful in building positive dialogue about credit-related decisions for which the servicer needs external approvals from special servicers and controlling class holders.
Establishing a borrower ombudsman is another important tool for servicers to improve customer service responsiveness and efficiency. The borrower ombudsman provides borrowers with a resource and advocate when they have a communications breakdown with the servicing or asset management representatives. Many times this is a communications issue, or helps expedite a request that gets misrouted or delayed. The ombudsman can also assist in confirming that the borrower understands the need to provide the complete information necessary to review and approve an asset management request.
Improving communications between borrowers and their servicing counterparts is very important in improving the customer service experience. Effective and efficient communications start with being able to get to the right contact who can either handle the request directly or transfer it to the appropriate party.
The borrower should be able to get to the right place either through the borrower customer service call-in facility or their designated representative. All customer-facing personnel should be trained in improving their listening skills, learning how to acknowledge borrowers' requests and empathize with their situations. This training should also emphasize the importance of calls versus emails to resolve issues. Again, improving communications improves customer service and efficiency.
Freddie Mac has launched a major initiative to address borrower customer service as part of its Capital Markets [Execution.sup.sm] (CME) securitization program. This initiative is intended to address some of the customer service issues inherent in CMBS transactions.
The focus of the Freddie Mac CME servicing construct is to define a more flexible servicing standard and reduce the number of parties involved in the borrower-initiated request asset management approval process, and provide the primary, master and servicers, as well as the controlling class holders, with additional compensation to encourage better borrower customer service.
The Freddie Mac CME program has been very successful, and this initiative is making a difference as servicers are addressing how to better address their borrowers' needs. The success of this effort may encourage further improvements in the broader CMBS market.
Quality borrower customer service is a means to provide tangible competitive differentiation for third-party commercial loan servicers. Improving the borrower experience requires dedication, discipline and a commitment from management and staff. Technology and process management can support improvements to customer service, but ultimately it is the frontline customer-facing staff that needs proper training and supervision to effect change.
Stacey M. Berger is an executive vice president of Midland Loan Services, a PNC Real Estate business. Midland is a leading provider of loan servicing, asset management and technology for the commercial real estate finance industry, including CMBS master and special servicing. He can be reached at stacey.berger@pnc. NOTE: The views expressed by the author are his own, and this column was prepared for general informational purposes only and does not purport to be comprehensive. The information and views in this column do not constitute legal, tax, financial or accounting advice or recommendations to engage in any transaction. The views expressed here are subject to change due to market conditions and other factors.
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|Title Annotation:||COLUMNS: SERVICING|
|Comment:||Improving customer service for commercial real estate borrowers.(COLUMNS: SERVICING)|
|Author:||Berger, Stacey M.|
|Date:||Aug 1, 2015|
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