The Human Touch Works Wonders

The stories abound about screwed up closings. Usually it’s the home buyer’s fault. Did you hear the one about the buyers who purchased his-and-hers Dodge Challengers to celebrate on the morning settlement was set to take place? Or the young couple, already married, that co-signed on a loan for a diamond ring to celebrate buying a house? Or the buyer who retired from his job the day prior to closing?

Needless to say, they didn’t get their loans. Neither did the family who purchased a time-share when they were on vacation to celebrate buying their new home — before closing. Or the guy who showed up at closing with a pistol. Or the religious fanatic who had a meltdown, claiming God had told him the night before not to sign anything.

Kinda funny, until it happens to you. But the various professionals involved in the closing sometimes mess up the soup, too. You know, too many cooks.

Operational Obstacles

Take the case of the real estate agent who forgot to fill out the loan contingency for the buyer’s earnest money, putting their deposit at risk if the loan didn’t close, which it almost didn’t. And how about the one in which the process that took so long the buyers and sellers felt like hostages. Or the buyer’s check which was flagged incorrectly as “terrorist activity.”

Then there’s the story about the title guy who never mentioned that the down payment, a six-figure wire transfer, was never received. Turns out the husband thought the wife had dealt with it, while the wife thought hubby handled the rather important task. Of course, settlement had to be postponed.

Once, the system used by the buyer’s bank to transfer the documents package to escrow went offline the evening before she was supposed to sign the papers. The system came back online the next morning, closing day. But an hour later, the escrow agent still had not received the docs. The bank had sent the package to the wrong address. The borrower eventually closed, but not until early that evening. All that wasted time.

Small glitches, perhaps. But they lead to big-time dissatisfaction among borrowers. According to a Snapdocs survey, 60 percent of all home buyers are frustrated with the closing process. In other words, only 40 percent — just two out of every five borrowers’ settlements — went off without a hitch. Or at least a hiccup so minor it didn’t ruffle anyone’s feathers.

One in every four of the more than 2,000 borrowers polled by the digital closing provider said there were errors in their closing papers, mistakes so significant that the documents had to be re-signed at another time. Even a higher percentage had to take more than three hours off from work to close and a third incurred non-mortgage related expenses such as childcare and travel.

Of course, Snapdocs would like us to believe that borrowers who closed digitally had much better experiences. For example, its survey found that some did in less than an hour everything electronically that others did by hand. Moreover, 40 percent of those who went RON – for the uninitiated, Remote Online Notarization – did so, in part, because their lender offered that choice. And three out of four who settled remotely were “very satisfied” with the process.

Balancing Act

Was this a self-serving survey? Likely not. It was conducted by a third-party research platform and included responses from 2,042 folks who financed a purchase between January and June of last year. Besides, the results were all but confirmed by a Cloudvirga survey which found that nearly three out of four of the some 1,000 recent borrowers polled were very satisfied with the technology provided by their lenders in the application process.

But the truth is that total customer satisfaction probably lies somewhere in between manual and electronic. Indeed, J.D. Power’s latest mortgage origination satisfaction survey noted that lenders who have pursued a more hands-on advisory role with borrowers have reaped the rewards. Other lenders, meanwhile, have struggled.

One big problem these days is that many lenders have trimmed their staffs to stay afloat, making it more difficult to offer highly personalized customer service. But local loan officers who foster interpersonal relationships with would-be borrowers help boost satisfaction levels, the Power firm found. As did the Cloudvirga study, which reported that loan officers still play a dominant role.

“Given the level of overall satisfaction with the mortgage process — which still involved loan officers in both the application and ongoing document procurement process — this underscores that while customers are eager to embrace technology, they still want the ability to rely on human assistance when needed,” the digital POS provider’s report said.

To that point, Cloudvirga found that artificial intelligence has yet to be fully embraced. While the future holds even more use of AI — three out of five respondents said they’d have preferred the entire process be digital — roughly the same percentage said the use of artificial intelligence in the lending process could cause them to select another lender, presumably one that offers a human touch.

Double-Sided Dissatisfaction

Another J.D. Power report says the same, particularly when it comes to chatbots, those innocuous on-screen boxes that mimic human conversation but hardly ever seem to answer your queries. The bots offer a handful of choices, but what if your question, dilemma or problem doesn't fit the mold? “One of the biggest barriers to adoption of AI-powered customer service solutions is customer perception of online chat,” the marketing and advisory firm says.

The report, which is a deeper dive into the 2024 satisfaction survey, says just 9 percent of mortgage customers used online chat as their first point of contact when they experienced a problem. At the same time, 41 percent called customer service. To be sure, 83 percent of those who used chat said they managed to solve their issues. But those who spoke to a human had an even higher problem-solving success rate.

Not to belabor the point, but lenders have gripes, too. Among other things, they hate it when loans prepay, especially before they’ve had a chance to break even. They don’t like it when there are lies on a loan application, even little white ones. They think they are over-regulated. They dislike it when brokers are overly aggressive with poorly underwritten loans. And they don’t like it when vendors overcharge them.

Case in point on that last item: FICO, which recently raised its “wholesale royalty” for credit reports from $3.50 per to $4.95. Fully justified explains FICO: “At $4.95 per score, the royalty collected by FICO for mortgage is entirely fair and reasonable, particularly considering the significant benefits it brings to the industry,” Executive Vice President Jim Wehmann wrote in a blog post.

Actually, some lenders must have heaved a sigh of relief; they had been expecting FICO to jump the price by as much as 400 percent. But at the same time, the 41 percent increase, which starts this month, is still enough for their trade groups to renew their pleas for lawmakers and regulators to address the pricing practices of credit reporting products.

Credit Clash

Equifax is also under the gun. First Financial Lending and Greystone Mortgage filed a class-action lawsuit accusing the credit reporting agency of maintaining a monopoly in the market for electronic income and employment verification. Without getting too deep into the weeds, the suit charges that Equifax controls 40 percent of the market, effectively running the show.

At the time of the suit, the service’s VOIE price was $66.45, a 272 percent increase from just $17.85 in 2012. In some cases, though, the price runs to $200, the suit also says. But the suit also maintains that the credit reporting company blocks potential competitors from entering the market, thereby creating a monopoly.

Slowly, however, at least one rival has done pretty well. Argyle, which empowers lenders to auto-retrieve real-time paystubs, 1099s and W-2s (with their clients’ permission), has achieved significant growth in the past year, adding companies such as Newrez and Amerisave as clients. And it’s no wonder: its system not only involves people, but it is also “drastically less expensive” than that of Equifax.

How does 60-80 percent cheaper grab you? No complaints there.