When Tech Turns Off The Loan Spigot

Mortgage lenders embraced new technologies. But consumer satisfaction is taking a tumble because of it.

Lew Sichelman
A robot fallen on its side.

Have you ever called a service provider, only to hear a mechanical list of choices rather than a human voice? You know, press 1 if you want to make a payment, press 2 if you want to hear your balance, press 3 if you want to add a service, and on and on and on. And oh, by the way, pay attention because our list of options has recently changed.

Of course, the choices never match what you want to talk about. And good luck trying to reach a real live, honest-to-goodness person. Press 0 as many times as you like and you still are sent back to the original, mechanical menu. There’s nary a human within shouting distance. Which is, by now, exactly what you are doing, yelling into the phone, “customer service” or, alternatively, “agent.”

Now imagine this: What if the caller is a first-time home buyer trying to finance what undoubtedly is the largest purchase that he (or she – or they) has ever made in his relatively short lifetime. Indeed, it may be the largest purchase he’ll ever make, except maybe for moving up the housing ladder to his next home and the one after that. Or maybe buying that Lamborghini he always wanted.

Perhaps he’s already on your books and he needs some information about refinancing. Or maybe he’s looking to take out a second mortgage to pay for some remodeling now that he’s been “blessed” with a couple of kidlets and a dog. Or perhaps he’s looking to buy a vacation condo at the ocean and he wants to stick with you because the experience – so far – has been a good one.

Whatever the scenario, are you going to subject him to the same death march as described above? Lord, I hope not. But, according to J.D. Power, too many of you are. To wit, the consumer insight company says many lenders’ efforts to streamline workflows into a one-size-fits all machine has eroded customer satisfaction.

Consumer Vote No

Granted, the rush to buy houses during the pandemic, combined with the crush to refinance to take advantage of super low mortgage rates, have stressed the origination business to the max. But lenders’ inability to manage the workflow has left borrowers with a collective bad taste in their mouths.

“Mortgage originators have been working for years to create an effective and efficient origination process, primarily through digitization of the process and implementation of self-help tools, but the massive surge in volume has exposed some serious weaknesses in that approach,” says Jim Houston, the Power firm’s managing director of consumer lending and automotive finance intelligence.

As Houston sees it, it’s not enough to offer electronic applications and digitized tools to streamline and expedite activities up to and including loan closing. “Today’s mortgage customers expect personalized, highly customizable experiences that include the right mix of technology and personal interactions based on their unique needs and wants,” he says.

In particular, Power found that customer satisfaction has fallen across the board. That the process still requires some level of human interaction.

Three out of four Gen Y and Z1 mortgage customers who use both live personal service and digital self-service channels during the application and approval process told the company they “definitely will” consider their lender for their next loan. When only one of these two channels were used, that happiness rate falls more than 10 percentage points. Not terrible, but not good, either.

Another key finding: Among Gen Y and Z borrowers, the perceived timeline from application start to approval is shortest – just under 13 days on average – when live personal service and digital self-service are combined. But when traditional/text communication methods are added to the mix, the perceived timeline increases to an average of 21.5 days.

That’s not counterintuitive, though it seems so. Nearly three out of 10 reported that using all three interaction channels—live personal service, digital self-service and mail, email or texting—during their loan origination, resulting in lower satisfaction and perception of lengthier timelines than when the optimal combinations of interaction are used.

“The industry challenge is not to go all digital or all live personal service,” the report says, “but to tailor the right communication to the right customer at the right time.”

Interpersonal Need

Now, I’m not necessarily a giant fan of J.D. Power. It undertakes these surveys and then sells the results to the companies that could benefit from the findings. That’s why they never share their entire reports with the media. But while I question this modus operandi, I do not question – nor have I ever heard anyone else question – their findings. And in this case, they are not alone.

In a study commissioned by Solidfi, the Buffalo, N.Y.-based appraisal management outfit, Market Street Research surveyed 1,000 residential borrowers who have refinanced or purchased a home within the last two years. The major takeaway: People still want in-person interactions when purchasing and refinancing their home.

Yes, the preference for using digital tools is on the upswing, especially among the whippersnappers. But for three years now, Solidifi says borrowers have told researchers they prefer to close in an office or at home vs. online. In the most recent survey, almost two thirds of those polled indicated they’d prefer mobile notaries to facilitate their closings, including 71 percent of Millennials.

Borrowers also prefer interaction with appraisers. Indeed, those who were able to chat with the bank’s valuation expert, or perhaps walk along with the appraiser, had a better overall experience. In fact, two out of three said that having a full interior valuation – as opposed to an automated one – gave them more trust in their lenders.

Self-serving? To be sure. After all, Solidifi is an independent provider of appraisals and title and mortgage closing services. The same could be said of Ike Suri, chairman of Fundingshield, which offers transaction-level coverage against wire and title fraud, settlement risk, and closing agent compliance, among other things.

Tap The Brakes

Writing on the Forbes website as a member of the Forbes Council, Suri says the “desire to drive (technology) innovation” is healthy. At the same time, though, he suggests slowing down a bit, stepping back and considering how the next wave can threaten any gains technology offers.
Three threats, in particular. One is renewed scrutiny by federal and state regulators. Another is cyber crime, and the third is biased algorithms.  

Regulatory intrusion has been discussed, ad infinitum, even in this column. So has cyber theft, but not enough. According to the FBI, it took seven years to log the first million cyber crime complaints. But in the 14 months preceding its report in May, another million complaints have been registered. The full list now approaches 6 million. Yikes!

And that’s only the ones that have been reported, Suri points out, noting that he has “personally seen instances” where companies have failed to notify the authorities that they have been attacked because they don’t want to advertise that fact. “As our process have become more automated and data more digitized, we have become increasingly vulnerable,” he writes.

Then there’s all those other types of fraud -- application fraud on the front end and wire fraud on the back end. Both are on the rise, the former by borrowers themselves and the latter by thieves trying to separate borrowers from their money. Imagine if you’re a borrower who just realizes he wired money to someone he shouldn’t. Now he’s on the horn, trying to alert someone, anyone, only to hear that mechanical voice, “Press 1" to speak to the janitor, “press 2" to speak to donate to our charity, and so on and so on.

The Fundingshield executive also notes that “in theory,” automated underwriting tools and AI decisioning systems used to evaluate credit worthiness are without bias, are fair and equitable to everyone. But some maintain that the data and variables used in those algorithms are biased, so the jury has yet to reach a verdict on that. Consequently, he writes, “lenders need to take a renewed look” at the factors used to judge credit.

Suri is not suggesting a return to paper; rather, that more energy and resources be committed to shoring up automated processes. But the tech pioneer says that while he’s “a big believer” in the power of technology, he also reminds all of us that providing home ownership is “fundamentally” still a people business.

This article was originally published in the NMP Magazine January 2022 issue.
Lew Sichelman headshot
Lew Sichelman,
National Mortgage Professional Contributing Writer

Lew Sichelman has been covering the housing and mortgage sectors for 52 years. His syndicated column appears in major newspapers throughout the country. He also has been the real estate editor at two major Washington, D.C., dailies and spent 30 years on the staff of National Mortgage News, formerly National Thrift News.

Published on
Jan 03, 2022
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