When it comes to closings, an open book is bestJoe Amorosobetter communication at closings, helping consumers navigate closings
Let's face it. Most people are intimidated by the whole mortgage
application and closing process. Not only can it be overwhelming
for borrowers, there is also nothing fun about disclosing your
personal financial and credit information either. At best, many
view it as a necessary evil to getting a new home or refinancing
their existing home.
The issue of consumer frustration with the closing process is
once again driving HUD to consider another RESPA reform proposal.
According to a study done by CFI Group USA, consumers are most
frustrating by the lack of control they feel, and the inability to
shop fees and closing costs across lenders. HUD Secretary Alphonso
Jackson asserts that American consumers spend approximately $55
billion each year on closing costs they don't fully understand.
While consumer and industry groups debate how best to move
forward, what can we do to help borrowers navigate the process?
Reality check
Consider this: Borrowers who have just an average experience with
their closing aren't going to turn around and rave about you to
others. To get their recommendation and to earn their future
business, you need to ensure that they remember their closing as
transparent, pleasant and hurdle-free.
How high are the stakes for your long-term business when the
closing process does not go smoothly? Let's say the closing gets
botched due to poor communication or unexpected fees. According to
research done by the Ken Blanchard Companies, 100 percent of
unhappy customers will tell at least nine others about their
dissatisfaction, 96 percent won't complain about poor service, and
90 percent won't return.
Clearly, it's in everyone's best interest to make closings as
free from aggravation and surprises as possible. You not only want
a satisfied, repeat customer, you want positive referrals. Your
best weapon for keeping loans from falling apart and maintaining a
favorable reputation is not legislation; its good, old-fashioned
communication.
Communication is key
One of the most common (and easily avoidable) pitfalls in the
closing process is that loan officers simply fail to communicate
basic details of the transaction, and the buyer ends up caught
unaware.
It's true that some buyers still won't pay any attention to
their documents until they reach the closing table. However, if a
loan officer is savvy and wants to avoid do-overs, he will keep a
steady line of communication going. Sending an informed borrower to
the table who understands the terms and timetables of the loan,
makes for a happy borrower, a happy loan officer and a happy
lender.
Managing expectations
It may seem basic, but addressing realistic expectations up front
can prevent a lot of heartburn at closing.
In the worst scenario, a borrower applies for a loan, but the
loan officer supplies only minimal information or fails to fully
disclose and/or adequately explain basic terms such as PMI, or
fixed versus adjustable rates. The borrower then has false
expectations about the costs or terms of the loan and probably
signs documents he doesn't fully understand. At closing time, the
borrower is shocked when presented with the final package, and the
loan either dies or has to be rewritten.
Contrast that with the best scenario, where the loan officer
presents a variety of loan programs for the borrower to choose from
initially. He lays out the related documents, disclosures and
expenses, so that the borrower can make an educated decision about
which loan option is best. Subsequently, there are no secrets and
the borrower gets exactly what he expected at the closing
table.
The process is significantly more seamless, and ultimately
serves to strengthen the relationship between loan officers and
their borrowers.
Accuracy vs. quantity
There is also a difference in the philosophical approach some loan
officers take toward closings. Keeping the process simple and
streamlined for buyers is good. Keeping the borrower in the dark,
however, is not a good practice.
Some loan officers feel that the less information they give to
borrowers, the more likely that borrower is to stay with them.
However, this kind of "don't worry about it" approach can result in
spontaneous or last-minute decisions that are often made under
pressure, and can cause a plethora of problems at closing.
The question to honestly ponder in our industry is whether we
should gauge our success on the volume of loans we close, or on the
number of subsequent referrals each loan generates instead.
In my opinion, accuracy and by extension, referrals always wins
out over quantity. We all need to periodically stop and examine
what we are promoting, writing and closing, to ensure that quality
and the experience of the buyer doesn't suffer.
In closing ...
Unfortunately, there will always be a certain number of unavoidable
obstacles that rear their ugly head at the closing table, like
title issues and battling spouses. But with a few proactive, common
sense steps, we can avoid closing horror stories and minimize those
last-minute surprises that upset buyers and can ultimately kill a
deal.
RESPA reform initiatives aside, if we want to contribute to a
harmonious closing process and avoid unnecessary strain between
consumers, loan officers and lenders, we need to be diligent about
maintaining open communication and setting expectations, right out
of the gate. It's the best way to raise the profile of our industry
and improve the image we have as mortgage brokers and lenders in
the hearts and minds of our customers.
Joe Amoroso is a senior vice president with Opteum Financial Services. He may
be reached by e-mail at
[email protected].
