May 2016 - Rise and Fall

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TH E M R EP O RT | 45 O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T ORIGINATION THE LATEST Lenders Can Ease TRID Difficulties with Increase In Communication Survey shows borrowers are happier, more satisfied, despite trid hold-ups. H ere's something that sounds counterintui- tive: When it comes to closings, borrowers over the past six months have experienced longer timeframes and witnessed higher post-closing costs than they saw before TILA- RESPA Integrated Disclosure (TRID) was fully implemented in October. And yet, they are highly satisfied with the entire, tangled, frustrating closing process. The reason, according to Georgia-based strategic advisory and consulting firm STRATMOR Group, is so old-fashioned it almost comes with its own horse and carriage driver: Lenders are talking more to borrowers. STRATMOR has released its latest MortgageSAT survey on the impact of TRID on borrower and lender satisfaction. What it found was that TRID is being well- received by borrowers but not so well by lenders. For borrowers, there is a signif - icant level of satisfaction—around 90 percent—among those who have been contacted by their lenders about what the closing process will entail. According to Dr. Matthew Lind, senior partner and founder of STRATMOR, customer satisfaction has risen among borrowers from 87 to 91 percent, the highest since the firm launched MortgageSAT in 2013. This satisfaction rating coin- cides extremely closely to the rise in the number of borrowers who reported they'd been contacted (as per TRID guidelines) by their lend- ers before closing. Lind said that the simple act of a lender, say, telling clients up front how many forms will be involved (rather than piecemeal sending them a form here and there) or giving borrowers the address and time of the closing has dramatically raised customer satisfaction. In fact, he said, the difference between happy cus- tomers and unhappy ones is a major gulf. Among 13,000-plus borrowers who said they were contacted by the lender prior to closing, 94 percent were satisfied; among the 1,022 who weren't, only 60 percent were satisfied, he said. "That's abysmal." Lind also said that in the rush to find better ways to serve cus- tomers, a lot of lenders overlook the simple and free solutions like texting, emailing, or simply call- ing once or twice to fill clients in on what's happening. In fact, Lind cited a famous 1989 article in the New England Journal of Medicine that identified home repairs—not death, divorce, or financial ruin—as the No. 1 cause of stress among Americans. The reason: because contractors never told homeowners anything and the guesswork and frustrations make things much worse than they need to be. The longer closing times—an average of 48 days—borrowers face seems to be of little concern, as long as they are in the know about what's going on with their mortgage deals, Lind said. If it costs more and takes a longer time, but people feel they it's all worth it, "we think that's a fair trade," he said. Among lenders, satisfaction with the TRID process is a dif - ferent story, STRATMOR found. According to the survey, indepen- dent lenders were generally ahead of banks in TRID implementation. This implementation was fully accomplished at 72 percent of small- and 80 percent of mid-size independents, the survey found. Conversely, those numbers were 33 and 44 percent, respectively, for small- and mid-size banks. In fact, the report found, banks seemed to have a harder time with implementation all around, with 31 percent characterizing their experience under TRID as either "difficult" or "terrible," ver - sus only 16 percent of indepen- dents reporting similar results. One of the issues lenders are facing is that closing costs are up by an average of $209 per loan since October, and that lenders, Lind said, are primarily eating the costs. Those costs, he said, are ex - pected to dip back to somewhere between $160 and $180 per loan. "Implementing TRID has obvi- ously not been easy for lenders," Lind said. Along with eating those increased closing costs, he added, "lenders are estimat- ing that only about 17 percent of those costs can be recovered through additional charges." Lind said that one additional frustration among lenders that typically affects larger institutions more than independents is that in non-independent lenders (such as larger banks), the loan officers are not in control of the technology; it's more of an extension of the IT department, whereas smaller independent lenders tend to have systems everyone can work and use effectively. The bottom line as Lind sees it, though, is that lenders will in the long run do well with repeat clients if they take simple steps toward customer satisfaction, such as training representatives how to stay in contact and sim - ply inform borrowers during the closing period. "We try to look at all the fac- tors that improve satisfaction," he said. "Some of them could be costly, but most of them cost nothing. None of them involve rocket science."

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