Disrupters to Mortgage Servicing

DALLAS–You’ve seen it with Uber, Amazon and other companies bringing new models to traditional businesses. And disruption is already rampant in the mortgage servicing industry.

Craig Martin, Senior Director and Mortgage Practice Lead with J.D.Power, Costa Mesa, Calif., said servicers should see disruption as an opportunity, not as…well, disruption.

“Most of us see disruptors as bright shiny objects,” Martin said here at the MBA National Mortgage Servicing Conference & Expo. “We think there’s a different way of looking at them.”

Servicers, like most businesses, believe control is the key to fighting disruption. But Martin said customers are increasingly driving processes–and they don’t necessarily want to do things the way businesses want them to.

“Your business outcomes are going to be a function of your relationship with your customers,” Martin said. “And you have to be prepared for it.”

Amazon, for example, builds its business starting with customer needs that don’t change, Martin said. “Then it uses technology to meet those needs in better ways,” he said.

Mitigating disruption rests on five key factors, Martin said: Convenience; Recognition; Advice; Trust; and Value.

Convenience is a key factor to easing disruption, Martin said–something that isn’t prevalent in the mortgage servicing industry. For example, a generation ago, Commerce Bank branded itself as “America’s Most Convenient Bank,” Martin noted. It’s disruptor? It stayed open late on weekdays and opened on weekends. “That’s not ‘disruption’ today,” he said. “I haven’t been inside a bank branch in three years and I suspect a lot of you haven’t either.”

Mortgage servicing is not very cutting-edge right now, Martin noted. “The only time a mortgage servicer values communication with their customers is when something goes wrong,” he said. “We’re getting to a point where mortgage servicing is becoming misaligned with what its customers want. Expectations are rising not because of other servicers, but because of what Amazon and other disrupters are doing. They are changing the dynamic of what they expect from you.”

The key to effective communication with customers, Martin said, is old-school. “Respond,” he said. “Listen to their problem. Walk them through the issue. Make sure they are satisfied with the experience.”

John Courtney, CEO of NextJob, Klamath Falls, Ore., said the biggest disruptor among mortgage servicing customers is job loss. The Great Recession, he said, created a huge disruption, as it became increasingly difficult to find jobs, driving down the labor participation rate and driving up the number of people with long-term unemployment benefits. Even after recovery, the average duration of unemployment between four and six months–the difference, Courtney said, in a mortgage loan falling into delinquency and foreclosure.

Courtney specializes in career re-employment. This can be done, he said, through weekly job coaching, web workshops and online training–services that NextJob provides.

Working with Fifth Third Bank in 2012, NextJob identified a list of Fifth Third borrowers who were 60 or more days late on their mortgage loans. It offered a job training program to these borrowers. The result: more than 40 percent of borrowers got new jobs within 60 days, enabling Fifth Third to engage in loan modification programs to prevent foreclosures. The program has since expanded to other entities, including Freddie Mac.

“We don’t have all the answers, but we’re pretty sure you do,” Courtney said. “Our goal is that when the next recession occurs, we’ll be lined up with every bank, so that we can minimize disruption.”