Magazine article Mortgage Banking

Loan Servicing: Superior Execution, Superior Customer Service

Magazine article Mortgage Banking

Loan Servicing: Superior Execution, Superior Customer Service

Article excerpt

IN DECEMBER 2003, FANNIE MAE REPORTed mortgage debt outstanding (MDO) on one-to-four-unit family homes stood at approximately $7.9 trillion, and forecasted strong MDO growth of 8 percent to 8.5 percent for 2004. Now that the anticipated balanced originations market has arrived, loan servicing becomes a much stronger source of revenue. And the industry's most effective servicers stand to reap the rewards.

There are certainly no big secrets to effective loan servicing. The basic formula is simple: Process payments and handle any other administrative requirements at the lowest possible cost per loan, combined with the highest quality of service. Of course, servicing is a low-margin business that requires economies of scale and continued investment in technology and process efficiencies. As is the case in loan originations, loan servicing has become increasingly consolidated; the top 10 loan servicers have 50 percent market share, and the top four--Washington Mutual, Wells Fargo, Countrywide and Chase--now hold 34 percent of servicing market share.

As astute readers will have noticed, a critical element is missing in the loan servicing statements in the previous paragraph. That element is: customer service. In any business climate and every interest rate environment, providing the highest-quality customer service differentiates the superior mortgage banker from the merely adequate. And let's be brutally honest. During the refinance boom, customer service in our industry suffered. On a minute-by-minute basis, the sheer volumes over-whelmed even some of the most efficient operations and systems. As an industry we have work to do repairing customer relationships--and not just because it's the right thing to do. It's imperative to long-term success.

Existing customers are the key to growth, provided they are satisfied with the treatment they receive from their lender. They are our most valuable source of future loan originations; the respect and service levels we provide today translate into more business tomorrow. To provide superior service, loan servicing organizations must meet customers' needs and preferences, including:

* 24-hour account access via the Internet or through a toll-free automated account information calling system;

* customer service representatives who are knowledgeable and friendly loan servicing experts available over the phone;

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* convenient payment options through a variety of Internet and other electronic payment options; and

* monthly statements delivered in the manner each customer prefers: paper via mail or electronically via online monthly statements.

A few years ago, these capabilities were great new technology-enabled tools. Today, customers expect these options from their loan servicer, and they expect further personalization--availability of account information in their language of choice, for example.

Customers who experience high levels of satisfaction and feel they are receiving personalized service are much more likely to welcome offers for products that meet their other financial needs, such as using a home-equity loan for college tuition. To restate the obvious, cross-selling to your portfolio customers is a whole lot easier and more effective if your customer is satisfied with you; and vice versa, nearly impossible in a situation of dissatisfaction. …

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