Measuring Customer Satisfaction In Mortgage
Measuring Customer Satisfaction in Mortgage:A White Paper
Customer Relationship Measurementevolving as a new requirementThe U.S. home finance industry wasprofoundly changed by the passage ofthe Dodd-Frank Wall Street Reformand Consumer Protection Act. Thenew federal regulator born of this act,the Consumer Financial ProtectionBureau (CFPB), is, in the words ofcurrent CFPB Director RichardCordray, a new regime that willoversee our industry in perpetuity. TheBureau’s first work was to writehundreds of new rules that are still inthe process of being rolled out.Lenders have seen regulators comeand go over the years, but thechanges the CFPB is bringing to ourindustry now are unprecedented.Among the most significant of thesechanges is the way mortgage lendersand their third party suppliers engagein relationships with customers, andwhether lenders can measure theimpact of their processes on theconsumer. In this way,CFPB is making real CRM (CustomerRelationship Measurement!) a newfocus for lenders.The traditional measures of success inmortgage banking include the numberof loans made, number sold into thesecondary market, market share,profitability, and other financialmatrices. Far down the list (ifmeasured at all) has been customers’satisfaction with the transaction andthe overall borrowing experience.Customer Relationship Measurementhas not been an area in which bankshave invested much time, attention,and capital, choosing to spend thoseresources on the development ofwholesale networks, correspondentrelationships or capital markets efforts.Relationships that mattered the mostto mortgage bankers tended to bethose with other financial servicescompanies and governmentregulators. And even thoseSTRATMOR MortgageSAT White Paperrelationships were measured infinancial terms.The CFPB is making it clear that thismust change. For the first time in ourindustry’s history, the safety andsoundness of the financial institution isjust one part, albeit an important one,of what the government hopes tosafeguard through legislation,regulation, oversight and enforcement.The other part has to do with Americanconsumers’ experience throughout themortgage lending process, andimportantly, their understanding ofeach step along the loan productionline. The Bureau expects consumersof mortgage banking services andproducts to walk away from everyengagement with a sense of clarityand satisfaction with the transaction.Naturally, this poses a problem forlenders not called upon before toperform such measures. And unlikefinancial measurements, most factorsrelating to customer satisfaction arequalitative in nature, leaving mortgageexecutives at a loss to find effectiveways to collect, analyze, and drawactionable conclusions aboutconsumers’ feelings about their buyingexperience. The CFPB appears tohave found what may turn out to bethe standard gauge of customersatisfaction: measuring its opposite,customer dissatisfaction.By creating a very public repository forconsumer complaint data, the CFPB isusing dissatisfaction to determine howwell the industry is meeting its newmandate for customer service. While itmay seem like looking for darkness todetermine how bright a light is, it hasthus far delivered a great deal of data.As you would expect, much of it is notgood for the industry.2
CFPB makes it easy for consumersto be heardIn an effort to engage consumers inorder to better understand theirexperiences in dealing with financialinstitutions of all kinds, the CFPB hasset up numerous communicationportals: public field hearings, listeningevents, roundtables, and town halls, aswell as the CFPB website. Among themost controversial of these portals isthe CFPB Consumer ComplaintDatabase. Managed by the Office ofConsumer Response, the database isused to take in, process, and facilitateresponses to consumer complaints.The Bureau received over 160,000complaints from consumers aboutfinancial products and services in2013, and that number appears to beclimbing above 20,000 complaintseach month. Of these, 37% are relatedto the mortgage, a much higherpercentage than is attributed to anyother product line that banks offer.¹Of the complaints consumers lodgeabout the mortgage process, about85% are currently related to theservicing operation, as you wouldexpect given the recent foreclosurecrisis. But that leaves about 10,000complaints last year related to theorigination side, and the number isincreasing as more borrowers becomeaware of the option to contact theCFPB. This means that there were10,000 mortgage loan closings lastyear after which a customer was sodissatisfied that they actually went to agovernment website and lodged acomplaint. That’s enough negativefeedback to both destroy reputationsand incite regulators to audit.While some may question the efficacyof the CFPB’s method to measuresomething that has never beenmeasured in the industry before, itcannot be denied that the Bureau haspositioned itself as the champion of theAmerican home loan borrower.Customer satisfaction is now astandard that the industry must payclose attention to. The truth is, there isan excellent business reason for doingso beyond the obvious monetary, andin some cases criminal, penalties thataccompany noncompliance. Lendersshould also care about customersatisfaction because it will bring themmore business.Building Referral Business andRepeat CustomersEven as unhappy borrowers havebeen empowered to speak out aboutpoor service from lenders, satisfiedcustomers can be turned into businessreferral engines as well as excellenttools for social proof, which is soimportant to the new generation ofAmerican consumers.Last year, 10,000customers were sodissatisfied with theloan closing that theyactually filed acomplaint with theCFPB.Consumers recommend products andservices to each other every day,through word-of-mouth, socialnetworks, and by posting reviews oncompany websites. They typically don’texhibit this behavior as regardsmortgage lenders because ourindustry has never empowered them todo so in the past. Part of the reason forthat, of course, is that we had littlereason to care about their level ofsatisfaction as long as the closingdocuments were completed correctly.We have evidence that shows thatconsumers who are satisfied with theirlender will take actions that will benefitthat lender’s business if they areasked to do so. In addition, we canshow that reaching out to a dissatisfiedborrower within a week of the loanclosing can change that borrower’sopinion of the lender, level ofsatisfaction with the experience and1Report of the Consumer Financial Protection Bureau Pursuant to Section 1017(e)(4) of the Dodd-Frank Act, (12-30-13). See pgs. 6and 31.STRATMOR MortgageSAT White Paper3
even result in the same type ofbusiness building activity that a fullysatisfied borrower exhibits. Thishappens even if the borrower doesn’tultimately get everything they wantedin the beginning.The key, of course, lies in knowingwhich borrowers are satisfied, so theycan be approached as a source ofadditional business, and which aredissatisfied, so the relationship can berepaired before more damage is done,such as reporting the lender to theCFPB. Most lenders are not able toidentify these borrowers with traditionalmethods, but there is a way that it canbe done and some forward thinkinglenders are doing it today.How this has been done in the pastMost mortgage executives who readthe opening to this white paperintuitively know that customersatisfaction leads to positive impactsand dissatisfaction doesn’t. Further,they are well aware of thenoncompliance risk in today’s lendingenvironment. What many will not beable to immediately admit is that theydo not have consistent and reliablemethods to gauge customersatisfaction.First, most lenders don’t have a realsolution to measure borrowersatisfaction because they’ve never hadto create one before, at least not asustainable one. As discussed,satisfaction hasn’t been a criticalmetric in the past. This was particularlytrue of larger lenders who made highprofits by structuring their companiesunder a manufacturing paradigm.These firms operated as if they were inthe business of building mortgageloans like some other firm might buildwidgets. The end product was creatednot for the borrower, but for thesecondary mortgage market, which,after all, was the only entity providingliquidity to keep the lender’s operationin business.STRATMOR MortgageSAT White PaperIn the manufacturing model, theborrower is just one work input thatmust be included in order to create themortgage product. This approachmade it easier to insert a strawborrower and commit fraud, and alsocaused low lender retention ratesduring refinance cycles. Today, ofcourse, the danger comes fromtreating consumers like a commodityinstead of someone who must besatisfied not just because they may beinclined to look elsewhere with theirnext loan, but also because it may costthe lender today in the form of CFPBtype punishments and lower referralsduring a tough lending climate.Consequently, good tools formeasuring customers’ satisfactionhave not previously been in highdemand. Even so, some lendersrealized the value of satisfied clientsas a source of future referral business.Perhaps not as good a source as realestate agents, financial planners oraccountants, but good enough topositively impact the lender’sbusiness. These forward thinkinglenders set out to create tools tomeasure the satisfaction of theirborrowers and get referrals.The tool of choice was a one-pagedocument inserted in the stack ofdocuments completed during theclosing process. It asked a singlequestion: are you satisfied enough withyour new loan to refer us to yourfriends and family? It may have alsoprovided a number of blanks to acceptthe contact information for said friendsand family members. In most cases,the document was checked andsigned, like all of the other requireddocuments in the closing package, andreinserted into the folder. Rarely didthe borrower provide meaningfulinformation on other contacts, whowere almost never in the market for anew loan anyway. Worse, thedocument almost never served to warnthe lender of dissatisfaction on the partof the consumer, so the lender never4
got a chance to improve its serviceand salvage the relationship.In the rare cases when the surveyindicates performance is lacking, thelack of specificity would generally leadthe lender down the wrong path,leading to high investments in lowperformance areas. This is neither themost effective way to improve overallsatisfaction scores, nor ensure optimaluse of corporate assets. Finally, sittingin the file until someone on the bank’sstaff had time to find, read and parsethe information on these formspractically guaranteed that the lenderwould have no access to timelyinformation. The older the informationwas, the less likely it was to ever beused.The results of this sort ofmeasurement process are evident.The numbers speak for themselves.When borrowers go back to the marketfor a new mortgage loan or arefinance, they go to the same lenderless than 5% of the time.And yet, virtually every other industryengaged in business with Americanconsumers has a system that providesa good gauge of customer satisfaction.If they can do it, mortgage lenders can,too.A new approach to measuringCustomer SatisfactionWhen STRATMOR set out to establisha usable gauge for customersatisfaction in the mortgage industry,we started with the best standard wecould find in use at the time by otherindustries. It turns out that there is notonly a current measure in use, but anorganization chartered to researchcustomer satisfaction and to developtools for U.S. businesses intent onimproving this metric.The American Customer SatisfactionIndex (ACSI), founded at theUniversity of Michigan’s Ross SchoolSTRATMOR MortgageSAT White Paperof Business, is a national economicindicator of customer evaluations ofthe quality of products and servicesavailable to household consumers inthe United States. The ACSI usesdata from interviews with roughly70,000 customers annually as inputsto an econometric model formeasuring satisfaction with more than230 companies in 47 industries and 10economic sectors, as well as over 100services, programs, and websites offederal government agencies. TheACSI is the only measure of customersatisfaction whose predictive link tofinancial results are confirmed by thirdparty independent peer review and themarket.Even so, the ACSI’s metrics did not fitwell with the needs of the mortgageindustry. We needed to take the bulk ofthe research that went into the indexand make it match up with the specificneeds of mortgage bankers. Instead ofsetting off in pursuit of that missionalone, we enlisted the support of CFIGroup, co-founder of the ACSI, tocreate a working satisfaction gauge forthe banking community.When borrowers goback to the marketfor a new mortgageloan or a refinance,they go to thesame lender lessthan 5% of thetime.CFI Group is a global leader inproviding customer feedback insightsthrough analytics. CFI Group providesa technology platform that leveragesthe science of the American CustomerSatisfaction Index (ACSI). Thisplatform continuously measures thecustomer experience across multiplechannels, benchmarks performance,and prioritizes improvements formaximum impact. We partnered withCFI in 2013 to create a similar indexfor the mortgage industry.A new index to measure CustomerSatisfaction in the MortgageIndustryThe Mortgage Customer SatisfactionIndex (MCSI) is an adaptation of theACSI designed to fit the mortgageindustry and measure the borrower’s5
experience. MCSI was developed bySTRATMOR Group and CFI Group.Our product, MortgageSAT, uses theMCSI as a uniform measure ofborrower experience across themortgage industry. It gives us both theability to compare to a mortgagebanker’s customer ratings with thoseof its peers and, perhaps moreimportantly, it gives lenders the abilityto understand the impacts of theirperformance across a wide range ofdata from the lenders own LOS.To do this right, we need to ask theright questions at the right time andfind the right technology that will bothmake it easy for the consumer to giveus the information we seek and give usthe analytical power to make sense ofthe data we receive.MortgageSAT invites your borrowersvia email to take a standardized onlinesatisfaction survey shortly afterclosing. An initial invitation is sent, plusthree reminders. Invitations are sentautomatically by MortgageSAT,however the invitations are seen bythe consumer as coming “from” thelender’s email address. In this way, theact of actually sending the survey, ofasking for feedback on every closedloan, can demonstrate a lender’scommitment to satisfaction.It’s easy for customers to use. Theconsumers click through and rank theirexperience at various steps of theprocess, and have the chance toprovide free form comments as well.As the results come in, lenders haveaccess to an online portal whichprovides real-time borrowersatisfaction information scores andinsights, as well as the ability to viewborrowers’ responses and comments.This lets the lender learn how theexperience was based on currentmarket and operating conditions, not2just at some distant time in the past.And the lenders can see how they aredoing compared to others in thenational benchmark as well.Using the Scores that your borrowersgive to each Satisfaction Driver andtheir ultimate Satisfaction Score,MortgageSAT can statisticallycalculate (“regress”) the relativecontribution (“impact”) that each Driverhas on Overall Satisfaction. In otherwords, this tells you what Drivers youshould focus on to increasesatisfaction Then, using similarstatistical methods, MortgageSAT cantell you how much an increase inSatisfaction will also increase thelikelihood that you will retain aborrower or that they will refer you to anew borrower. In other words, we canassess the economic value of repeatbusiness and referrals.Finally, by linking these two statisticalanalyses, the lender can analyze theeconomic value gained by improvingany single Satisfaction Driver orcombination of drivers. According toThe Harvard Business Review² “A onepoint change in ACSI is associatedwith a 4.6% change in market value.”This will translate directly to gains inthe mortgage industry, where even a1% change in market value leads tosignificantly higher profitability.Results the lender can build onDepending on the lender, up to 40% ofconsumers respond to the surveyinvitation and complete the onlinesurvey. To put this into perspective,mid-tier lenders can see as many as75 completed surveys per day,depending upon their production level.Currently, lenders using MortgageSATare surveying more than 4,000consumers per month, which is moreChristopher W. Hart, “Beating the Market with Customer Satisfaction”, Harvard Business Review, March 2007: 30-31STRATMOR MortgageSAT White Paper6
than another leading survey companysurveys in a year.Results are aggregated for eachlender participant in real time, allowinglenders to instantly determine howsatisfied borrowers are using a widerange of data including data directlyfrom the lenders LOS. This data allowslender to compare borrowers’satisfaction by loan purpose,geography, loan amount, borrowercredit profile, and many othertransactional elements. So, not only dolenders know how they are doing onsatisfaction for recent transactions,they can also learn how they are doingon purchase loans separately, or howcritical it is to close loans within 45days, or whether income or creditappear to be drivers of satisfaction.And when lenders find the pain points-- those areas where borrowersatisfaction appears to be trailing, theycan see the details for that survey,they can review the borrowercomments to perhaps gain even moreinsights, and finally they have the loandetails which allow the lender to digmore deeply into each transaction ifnecessary. It’s important to note thatthe MortgageSAT process is notmerely telling you that somecustomers have satisfaction issues, it’stell you which ones and helpingyou figure out why.Lenders can also use the portal to seesatisfaction results for each of the fourcritical employees that touch closedloan files -- the Loan Originators,Processor, Underwriter and Closer.This allows organizations to see notjust how they are going, but how eachemployee is impacting satisfaction. It’simportant to remember that there are alot of happy customers in the mortgageprocess, and when the system tellsSTRATMOR MortgageSAT White Paperyou who they are, and who worked ontheir loan file, then these employeescan be congratulated or recognized forthat good work. Companies are evenable to use customer satisfaction as adriver for compensation as they workto create a customer centric culture.Perhaps the most powerful feature ofMortgageSAT is that lenders using theportal receive immediate notification ofborrowers returning poor scores. Theycan then see the actual results and onscreen comments their borrower hasreturned, regarding the loan officer, theapplication process and the overallborrowing experience. This gives thelender the power to initiatecommunication with the borrower andtake corrective actions immediately.Finding out much later that you haveunhappy customers is a frustration formany lenders, because the damagemay already have been done to thosecompanies that rely on word of mouthof referrals to drive volume.Finally, MortgageSAT is easy to deployand administer; the system can be upand running in a matter of weeks,collecting feedback and providing keeninsights into borrowers’ experiences.MortgageSAT data collected thus farindicates that most mortgagecustomers are relatively satisfied,overall. Even so, our surveys revealthat between 5% and 10% of everymortgage firm’s customers not happy.Furthermore, these dissatisfiedcustomers are willing to talk about it ifthey are asked. Lenders thatproactively reach out to theseborrowers are often able to solveproblems, provide better informationand repair relationships, increasingborrower satisfaction -- and companyprofitability.7
About STRATMOR Group (www.stratmorgroup.com)The STRATMOR Group provides the mortgage industry with objective industryleading data, information and insights that also drive its consulting practice. Asconsultants, we specialize in performance benchmarking and operationalanalysis, strategy development, mergers and acquisitions, high-level technologyadvice, financial modeling and proprietary surveys. Within the mortgage industry,we are known as a trusted adviser and problem-solving firm that generatessignificant value for its clients. For more information, visit the company website athttp://www.stratmorgroup.com.Garth GrahamManaging STRATMOR MortgageSAT White PaperDr. Matt LindManaging Director781-749-6457matt.lind@stratmorgroup.com8
a good gauge of customer satisfaction. If they can do it, mortgage lenders can, too. A new approach to measuring Customer Satisfaction When STRATMOR set out to establish a usable gauge for customer satisfaction in the mortgage industry, we started with the best standard we could find in use at the time by other industries.
Customer satisfaction has identified as an important influencer on customer loyalty. Further, customer trust impacted by customer satisfaction which proved that customer satisfaction is an antecedent of customer trust. Moreover, an indirect relationship between customer satisfaction and loyalty through customer trust was observed.
of satisfaction and quality, i.e. if one perceives quality and customer satisfaction as a process (cf. Deming, 1982). Consequently, technical and moral quality affect customer satisfaction, while the manufacturer can determine the level of customer satisfaction and respond via product innovations to ensure even greater customer satisfaction. By .
A fixed-rate mortgage (FRM) is a mortgage in which the rate of interest charged remains unchanged throughout the entire term of the loan. iv. A variable-rate mortgage (VRM) is a mortgage in which the rate of interest charged is subject to change during the term of the loan. v. An adjustable-rate mortgage (ARM) is a mortgage in which the
Our end to end mortgage supporting services improved quality of reviews and mortgage loan purchase time of clie\ nt. Keywords: mortgage back-office support services; mortgage processing support services; outsource mortgage processing services Created Date: 4/12/2018 4:17:49 PM
strategies and customer satisfaction. ii. Ho 3b - There is no statistical significant relationship between honest complaint resolution strategies and customer satisfaction. LITERATURE REVIEW Concept of Customer Satisfaction Customer satisfaction refers to a person's satisfaction with a product, a service, or a supplier (Terpstra
customer satisfaction correlated positively with customer satisfaction. Badara, et. al. (2013) states the importance of customer satisfaction as it is a significat predictor to customer loyalty. In the airlines area, airline companies have recently realized the importance of customer satisfaction to find themselves in this competitive world.
the words "evaluation" and "opinion", and satisfaction with the word "feeling". Customer satisfaction can be experienced at the specific encounter level or at an overall level of satisfaction. Service encounter satisfaction is the customer's satisfaction or .
The handbook Architectural Graphic Standards was first published in 1932, the same year and in the same city that the exhibition The International Style opened at The Museum of Modern Art in New York. The coincidence of these two events underscores the bifur cation in modern architectural practice between appearance and function. While the show emphasized formal composi tional principles to .
