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Loan servicing is a critical part of the mortgage industry. It encompasses managing customer service, delinquencies, forbearance, modifications, and collections.
In 2024, borrowers expect more transparency and user-friendly digital interfaces from their loan servicers. Lenders are integrating online self-service platforms, chatbots, and instant messaging to provide a more personalized experience for borrowers.
1. Customer Experience
There are many terms that come up when talking about customer service, including CX, which stands for “customer experience.” Customer experience encompasses every interaction a consumer has with your brand. It includes everything from a phone call to your customer support team to observing an advertisement for your business on social media.
Creating an exceptional customer experience is the best way to earn customer loyalty and referrals. It also helps you stand out from the competition and increase your customer base. In fact, according to Acquia, 76% of consumers will switch to a competitor after a single bad experience.
While a bad experience can be devastating for any business, the good news is that creating a positive customer experience doesn’t have to be difficult. With the right strategies and tools, it can be easy for loan servicing companies to exceed expectations and encourage repeat business.
Customer experience is a critical component for any business, whether it’s a B2C or B2B company. The reason is simple: customers have higher expectations than ever before. When a business meets or exceeds those expectations, it creates a positive customer experience that leads to referrals, repeat sales and even more revenue.
A company that strives for excellent CX must first understand its customers and what they want. This can be done through a variety of means, including surveys and community forums. Surveys can ask questions about specific points of friction or satisfaction, like the ease of making a purchase online or how fast a company responds to customer inquiries.
Using these metrics, you can monitor customer experience and make necessary adjustments to improve the user’s journey. For example, you can measure and analyze net promoter scores (NPS), customer satisfaction scores (CSAT) and customer effort scores (CES). Keeping tabs on these factors allows you to identify the areas that need improvement and ensure your customers are having an efficient experience with your business.
2. Data and Analytics
In a customer-centric world, loan servicing companies are leveraging data analytics and artificial intelligence to deliver better service and increase satisfaction. This requires a robust and scalable loan servicing platform that can integrate data from various sources, automate tasks and workflows, provide real-time insights and reporting, and support compliance and audit functions. It also requires implementing data governance and security policies and procedures that ensure data accuracy, integrity, and confidentiality and protect against cyberattacks and fraud.
In addition, loan servicing companies are deploying online portals and mobile apps to enable self-service for borrowers and investors. They are also enabling employees to work remotely by leveraging cloud-based and mobile-friendly solutions. This not only reduces operational costs but also improves scalability and performance.
Loan servicers use data to identify borrower needs and preferences, prevent delinquencies and defaults, optimize collections and recovery strategies, and personalize offers and communications. Predictive models analyze historical data to predict future behavior and alert customer service representatives when borrowers are at risk. For example, if a mortgage customer’s credit score declines significantly, a predictive model would alert the servicer, who can contact them to offer financial counseling or refinance options before their mortgage payments lapse.
Another crucial metric is First Call Resolution Rate (FCRR), which measures how quickly loan servicers resolve customer inquiries via phone, email, and chat. A high FCRR demonstrates efficient service and enhances satisfaction. It also helps to mitigate risk by identifying recurring issues that can be corrected. For example, if multiple customers complain about lengthy wait times when calling the customer service hotline, the loan servicer can adjust their call handling processes.
Additionally, loan servicers are using behavioral triggers and automated messages to encourage borrowers to take action. For example, if a borrower’s payment is due in five days, an automated message will remind them to make their payment. Moreover, segmentation tools help lenders target specific borrower segments with customized communication and outreach. For example, a student loan servicer can send repayment advice to recent graduates based on their credit scores and repayment habits. Moreover, sentiment analysis tools evaluate customer communications (emails and chats) to gauge their emotions and detect potential dissatisfaction.
3. Regulatory Compliance
Regulatory compliance is the process of adhering to laws and industry standards set by government agencies, as well as internal policies and guidelines. It’s a complex area, and a major pain point for many loan servicing companies. The volume of regulations has increased dramatically over the last few years, and it’s becoming more challenging to keep up with these changes. The result is that organizations often fail to meet the required levels of compliance, which can lead to fines, lawsuits, and shutdown.
The COVID-19 pandemic has led to a surge in forbearance requests and loan modifications, which means that loan servicers are working overtime to manage delinquencies and comply with regulations. They also have to deal with the growing expectations and demands of borrowers who want more digital solutions from their loan servicers.
To tackle these challenges, loan servicing companies need to leverage technology, including cloud, blockchain, and smart contracts, to automate processes and streamline data. They must also ensure that their employees understand and follow the company’s compliance policies and procedures, and document all of these processes. This will help them identify and mitigate risks, and it will also be useful for auditing purposes.
Achieving and maintaining regulatory compliance is not easy, but it is necessary for the success of a business. To avoid costly fines and violations, it’s important for companies to develop and implement a comprehensive risk management program that includes clear policy documents, training, and monitoring. It’s also important for organizations to prioritize their risks, starting with the most critical ones, and then moving on to less severe issues.
Ultimately, to remain competitive in 2024 and beyond, mortgage companies must improve their digital platforms and underwriting strategies to offer a more efficient and streamlined process for new homebuyers. This will help them attract millennials, who continue to view homeownership as central to the American Dream. They must also use innovative underwriting models and technology interventions like chatbots to offer more competitive rates and terms to non-traditional buyers. Moreover, they need to partner with insurance marketplace aggregators and other third-party firms to recommend the best offerings for their customers.
4. Automation
Automation refers to the use of technology in business operations, often replacing human intervention with computer-driven systems that can streamline processes and enhance efficiency. While it may vary in complexity depending on the task or process, the fundamental objective of automation is to enable companies to scale operations while maintaining high-quality outputs and minimizing the possibility of error.
Across multiple industries, the use of automation has been growing, and loan servicing is no exception. From cashier-less stores to chatbots and automated customer service, the benefits of this technology are clear to see: increased operational efficiencies, improved productivity, and a reduction in the risk of errors due to human intervention. This allows businesses to focus on more value-adding activities and achieve a competitive advantage in the market.
The mortgage industry is also embracing automation with digital mortgage platforms and AI-powered tools that help streamline several time-consuming tasks involved in origination. This enables lenders to meet rising borrower demand and offer mortgage solutions that are tailored to their unique financial circumstances and goals. In addition, mortgage lenders are focusing on strengthening their security measures in 2024 to safeguard sensitive information and financial transactions from cyber threats.
To cater to the changing needs of borrowers, loan servicing companies need to provide a seamless and convenient customer experience that is accessible through various channels and devices. This requires the use of self-service portals, mobile apps, and chatbots to facilitate communication and answer questions in a quick and efficient manner. Moreover, they need to leverage smarter loss mitigation strategies that can address the unique financial circumstances of borrowers and enable them to make payments on time.
While the mortgage industry is grappling with several challenges, there are several opportunities for growth in 2024. Increasing housing demand and an improving economy will drive mortgage origination volumes, while the recent drop in interest rates can spur refinance activity. Furthermore, technological interventions can facilitate mortgage product differentiation, expand the reach of lending programs to non-traditional borrowers, and enhance compliance and risk management initiatives. The digitalization of mortgages also presents a significant opportunity for lenders to reduce their costs and improve profitability.