Mortgage servicers – what's worrying clients?

"This is not a consumer problem; this is a corporate strategy problem"

Mortgage servicers – what's worrying clients?

JD Power has long conducted satisfaction studies on various products and industries. The consumer intelligence company has now zeroed in on mortgage servicers, in part showcasing a rising need for client outreach to avert defaults in a time of inflation.

Consumers were asked to rate across six different metrics, including the level of trust they have with the brand; how well they are kept informed and educated; and the level of effectiveness mortgage firms have in resolving problems or issues. All told, the J.D. Power Mortgage Servicer Satisfaction Study provides detailed information and insights on the performance of more than 30 of the largest servicers. Rocket Mortgage ranks highest among mortgage servicers with a score of 686 on a 1,000-point scale, followed by Guild Mortgage (668) and Chase (665).

Among the key findings:

  • Mortgage servicers cannot ignore customers’ financial health: The proportion of mortgage servicing customers identified as financially unhealthy is 54% this year. Overall satisfaction among financially unhealthy customers is 107 points lower than among customers in the financially healthy category. Default risk is also up 4% this year among mortgage customers.
  • Rise in mortgage transfers exacerbates year-over-year decline in customer satisfaction: Overall customer satisfaction with mortgage servicers is 601 (on a 1,000-point scale), down six points from 2022. The drop is most significant among the 37% of customers who had their mortgage transferred to a servicer that they did not choose. Overall satisfaction scores are 119 points lower when customers do not choose their servicer.

Given such findings, the study’s authors provided advice for mortgage customers: “Mortgage servicers want to help customers when they are under financial stress or having problems with their account,” researchers wrote. “The key for customers is to notify their mortgage servicer as early as possible and to provide as much detail as they can to get the best guidance.”

Inflation emerges as survey antagonist

Craig Martin, of JD Power, noted the proportion of customers identified as financially unhealthy was due to external factors spurred by inflation, not as a result of shortcuts taken in pushing through applications to qualify otherwise ineligible borrowers.

“It’s important to make a distinction between people’s ability to pay and financial health,” Martin told Mortgage Professional America during a telephone interview. “It’s not a delinquency or a reflection of paying ability, but rather how customers view themselves.”

To secure such data, questions run the gamut – including queries on how spending matches up with income, ability to pay bills on time, the level of savings customers have in terms of covering life expenses, Martin said. “It’s not a reflection of delinquencies but rather their financial well-being,” he added.

Customers are, by and large, financially strained against a backdrop of inflation: “Some of it could be ‘I’m spending too much money, I’ve overcharged on my credit card,’ things like that,” Martin said. “Or it could be ‘my savings are dwindling; the cost-of-living is too high.’ They’re still able to keep up with their bills. We haven’t seen a major rise in delinquencies nor people saying they won’t be able to pay their mortgages in the next 12 months. It’s just that these other early indicators indicating that people are being strained financially strained.”

Does the survey match broker views?

Laura Ray (pictured), a Florida-based broker at Liberty Mortgage Lending Group Inc., buttressed the findings about inflation-induced financial health. She also described her own tactics of continual contact with her clients in ensuring they are financially healthy.

Learn the steps on how to become a mortgage broker in Florida in this article.

“Right now, in many industries such as teaching, we are seeing a disproportionate ratio of income to inflation,” she told MPA. “Inflation increases while income has not increased at the same rate in many industries – particularly those in the government or public service arena.”

To a large degree, Ray suggested, the onus is on servicers in trying to avert defaults: “This goes back to proportions,” she said. “If servicers are seeing that there is disparity in satisfaction and do not seek to find solutions, it stands to reason that default risks will increase.”

To prevent defaults, she added, servicers should continually communicate with their customers toward offering financial health solutions if necessary. “Most consumers do not know what is offered,” she said. “If my financially unhealthy customer base is higher than my financially healthy customer base, my focus is going to be to educate the entire customer base to reduce the risk, increase understanding of solutions available in an attempt to reduce the default risk and prevent the financially healthy clients from falling into the default risk category.”

Broker shares concern over mortgage transfer rise

She shared concerns on the rise in mortgage transfers outlined in the study: “However, the transfer of servicing is not in and of itself the problem,” she noted. “The biggest problem lies in lack of both transparency in the transition and lack of cohesive processes that inform the client of how to easily and seamlessly transition to new servicers.”

Ray has detected a rising state of confusion among consumers: “More and more, I hear that the mortgage was transferred wherein the client had a tremendous amount of confusion in where to pay, who to pay, or movement of payment from the older servicer to the new one resulting in late fees or other problems.”

The problem does not lie with the consumer, she added: “Mortgages are being transferred in high rates and too often,” she said. “Servicers have to be more proactive in the transition by educating the consumer on exactly what to do and be more proactive with the prior lender to also educate the consumer as well as handle erroneous payments to the new servicer expediently. This is not a consumer problem; this is a corporate strategy problem.”

Read next: What are mortgage transfers?

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