Game Change

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Feature memories can be buried in the person's subconscious and emerge later as post-traumatic stress. People who go on vacation to established resort destinations, buy shoes from certain online vendors, and eat at nice restaurants typically have good experiences and fond memories. People who deal with certain government agencies, go to war in foreign lands, or take out home mortgage loans typically don't. In the case of the IRS and foreign wars, one might conclude that this is just the "nature of the beast." In the case of the home mortgage, it doesn't have to be. So what does it take to satisfy a borrower in today's mortgage lending world? First, borrowers must be empowered with good information. The government knows this, and almost every attempt it has made to improve the borrowing experience for consumers has resulted in additional information being presented to the consumer, generally in the form of a new disclosure. These disclosures are tucked into the loan file after being rubber-stamped by the borrower and forgotten. In almost all cases, they enter the file for archiving unread. Lenders have to find a better way to inform borrowers. But this is hampered somewhat by the second problem: we don't all enter the transaction with the same set of goals. We define a successful outcome differently than our customers. The government is aware of this, also, and has been aggressive in its attempts to wipe out the yield spread premium and reconfigure the way the industry pays its loan officers. It is not yet clear what consequences this will have on the industry. One thing is clear, however. The financial crash has left U.S. financial services customers distrustful of the institutions that serve them. Until that trust is restored, it will be difficult to ensure a good borrower experience. Finally, after producing millions of adjustable rate mortgages and then watching rates rise and 28 | The M Report those borrowers being forced into foreclosure, we have educated American homebuyers to the fact that they cannot know the future outcome of their mortgage transaction. The only thing they know for sure is if they get into trouble, there's a good chance that they'll lose everything. All of this has resulted in a home loan customer with a high level of anxiety coming into the transaction. This makes it all but impossible to ensure a positive consumer experience. more to the customer than just a source of financing. Information is part of the product we're offering and we must deliver that prior to even taking the loan application. Those firms that do the best job of this will emerge as the leading firms as the industry continues to recover. During the crash, some consumer advocates made a big deal out of the fact that the mortgage loan broker is not an advocate for the borrower he or she serves. Technically, this is quite true, but Information is part of the product we're offering and we must deliver that prior to even taking the loan application. Those firms that do the best job of this will emerge as the leading firms as the industry continues to recover. Three Key Priorities for Moving Forward U nless home loan prospects have better information about the lending process, a sense of shared goals with their lender and some idea of what their future outcome is likely to be, we cannot ensure a better consumer experience. Fortunately, we can provide all of these things to our loan applicants, if we wish. A better-informed consumer is possible if every lender adopts the mindset that they must be the industry's top loan originators will tell you that only by serving the needs of their borrowers do they earn enough referral and repeat business to remain top originators. The fact that the industry does not have a fiduciary obligation to ensure the safety of the borrower in the transaction is now counterbalanced by federal regulators' requirements that the industry ensure the borrower can repay the note and is not left in a worse financial position after the loan is closed. The fact that it remains in the best interests of both the borrower and the industry to which the loan be repaid must be made clear to the borrower. Due to the way the secondary market has been structured and the disconnection of the servicing industry from the loan origination business, borrowers have long been frustrated by having their loans sold away before the ink is even dry on the signatures. It has rarely been clear who owns their mortgage or who has the right to foreclose. The foreclosure crisis showed the industry that often we don't even know who has standing to foreclose. This must be clarified for borrowers if we hope to give them confidence in this important transaction. And now, it's time for our own thought experiment. Imagine a borrower who enters a lender's branch office or visits its website. Imagine that this borrower understands the products offered, its requirements, and its most likely impacts on the borrower's financial condition. Imagine further that the borrower feels a true sense of alignment between his goals and the goals of his lender. Finally, imagine a borrower with a high level of confidence in the ultimate outcome of the transaction and its long-term impacts on his life. Now, imagine what it would take to degrade that borrower's experience to the point of driving them to report the lender to a federal regulator. Only a gross mishandling of this borrower's account is likely to result in a negative customer experience. While that occasionally happens in our industry, it is not a common occurrence. This is an excellent time for lenders to give some attention to the borrower experience. After all, our federal regulators are doing just that and have already begun to use the information they glean from dissatisfied consumers against companies in our industry. The time to perfect the borrower experience is at hand. Paying heed to the issues addressed in this article will help.

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