The one overriding takeaway from the pandemic is that “business as usual” no longer cuts it. From health care red tape to food supply chains, every industry and every company needs to invest in change.
This is especially true in financial services, a sector that was forced to respond to widely divergent consumer experiences brought on by the outbreak. As we begin to see light at the end of the tunnel, it’s time for lenders and the mortgage industry to apply four key lessons learned during the pandemic in order to future-proof their businesses.
No. 1: Self-service, digital banking as table stakes
Adoption of online lending and servicing models was haphazard before the crisis, with many mortgage providers continuing to rely on a phone-centric engagement model for initiating loans, changing payments terms, and other meaningful activities.
Lockdowns and stay-at-home orders accelerated consumer demand for remote, self-service banking, even for complex transactions. Frustrated borrowers waited on hold for hours to reach a mortgage service representative to defer their payments. Mortgage companies that could afford to do so added more agents and rushed to implement chat support as a short-term solution.
Now, digital engagement channels will be table stakes for the industry. Mortgage companies must refine their digital strategies and invest in ongoing digital transformation to continue improving the user experience and increase automation that helps contain costs.
No. 2: Empathy matters more than ever
Even as people embrace online and remote services, the pandemic has also shown how much we value human connection and feeling heard. When people feel isolated, trusted relationships are more important than ever.
To retain and grow business, mortgage companies need to get to know their customers intimately and communicate proactively and with empathy. They need to understand and provide personalized services that support customers in difficult times.
Providers must react to homeowner expectations of maximum flexibility with offerings that cater to their needs and provide options. One easy change is to provide unique payment options that time payments with paydays.
No. 3: Real-time analytics are critical
Prior to the pandemic, underwriters had a set of tools to measure and adjust for risk that worked pretty well. They could evaluate factors such as credit scores, past delinquencies and bankruptcies, and debt-to-income ratios.
But over the past year, the risk picture has changed dramatically. Millions of homeowners have lost their jobs. Some are picking up work in the gig economy and are now self-employed with irregular paychecks.
The pandemic clearly demonstrated that past results aren’t a predictor of future success.
Not only has it become much more difficult to accurately assess risk, but the fast-moving nature of the crisis reinforced the need for real- time financial insights.
Lenders must make the investments required to give underwriting and servicing teams up-to-the-minute insights into which borrowers have lost a job, whose income is fluctuating, which are tapping unemployment benefits, whose debt obligations are growing, who has liquid cash on hand and whether payments are being made or missed.
By capturing and analyzing this information as it changes, mortgage companies can assess risk more accurately, take proactive steps to support struggling borrowers and reduce delinquencies.
No. 4: A tale of two borrowers
One of the many troubling consequences of COVID pandemic is the growing gap between the haves and the have-nots. This has created two financial realities that successful mortgage companies must be able to assess and serve simultaneously.
While many homeowners are struggling to pay mortgages, those lucky enough to retain and grow their income are looking to take advantage of low interest rates and refinance or buy new homes. Providers must be able to quickly diagnose a borrower’s status and have a differentiated range of products, servicing models, and communications available to each group.
For example, companies must be ready to help homeowners on the verge of default with proactive workouts such as forbearance or have phased modifications available to help those already in forbearance exit the program successfully.
At the same time, mortgage teams can increase their retention and recapture rate even in competitive markets with little brand loyalty by identifying performing loans and offering innovative, flexible payment options that improve customer satisfaction scores.
A double bottom-line recovery
It will be years before we know just how deeply the pandemic has transformed the economy. But by applying the lessons of the past year, mortgage providers can ensure more people successfully repay their loans and stay in their homes. As a result, they will be better positioned to take on more loans and grow their business.
