Brokers play a crucial role in servicer success, exec says
Mortgage servicers and brokers operate on opposite ends of a mortgage transaction. Because they’re looking at the transaction from different sides, they often find themselves at odds.
The relationship has, at times, been acrimonious because servicers have been preparing for a refinance wave that really hasn’t yet materialized, and brokers are concerned that former customers will be scooped up by these servicers.
In addition, many servicing companies have themselves been scooped up by mortgage companies, which allows for an all-in-one experience for the borrower. This lets borrowers remain in the same ecosystem throughout their mortgage, and in some cases, from home search to payoff.
But there are mutually beneficial reasons for brokers and servicers to work together. In the end, they have the same client, and it benefits both sides if the homeowner is kept happy throughout the process of getting and paying a mortgage. One executive said there are things that brokers and lenders can do early in the process to make servicing smoother.
Mirza Hodzic (pictured top), managing director and founder of BlackWolf, said having that cooperation from broker to servicer only makes the process better for the homeowner.
“We've actually just dealt with one of those things for a client of ours where we, yes, we help them on the servicing side, but we work directly with the lending side as well,” Hodzic told Mortgage Professional America. “We talk to them about staying in communication with their borrowers. We encourage them to build that relationship. Because when you have that relationship, it's easier to get answers, and you can reach out to borrowers and have that support on that side.”
Explaining the loan life cycle
Hodzic said if borrowers are made to understand what could happen with their loan at the front end of the transaction, it could potentially head off any confusion during the life of the loan.
“It doesn't have to be purely servicing that handles some of that,” he said. “Having those relationships and explaining things during the process, like, ‘Hey, your loan may transfer. This is what happens during a transfer.’ Those kinds of things are part of relationship building. They are the type of things that help the borrower understand what's happening to their mortgage. It's always something we recommend, and it's absolutely important overall in the whole process.”
Brokers and lenders who can give borrowers a road map of what will happen after closing could dramatically reduce future friction in the process. It could potentially help raise servicer satisfaction, which slumped in the latest JD Power survey last July.
“During the process of getting a loan and originating the loan, you have certain things you can take care of to avoid future issues and servicing,” Hodzic said. “You can set up borrowers with ACH. You can offer additional materials during the process that explain the servicing life cycle and escrow changes.
“I've actually seen this with my local credit union. They explain the escrow process in servicing during the origination process. That way, the borrower is not surprised down the road after they get their mortgage. It’s those small things and that extra work that you can put in that will help everyone down the line.”
Escrow a big focus
Rising escrow costs have been one of the major headlines in the mortgage industry, especially over the last couple of years. Rising property taxes and homeowners' insurance have caused mortgage payments to jump dramatically.
Hodzic said many borrowers are only focused on getting that mortgage signed and getting the keys to their new home, and aren’t focused on how their payment may increase.
“People don't know mortgages other than, ‘Hey, I'm making my mortgage payment,’” he said. “They're not in the business, so they don't understand. Sometimes, escrow analysis will raise your payment, or your taxes will go up. It's definitely the educational part that's crucial during that initial phase.
“Escrow is just so important because it affects the borrower directly in regards to their payments. Your payment jumps up a couple hundred dollars, and that's a big difference for the average person on a day-to-day basis. Having that explained to them that your taxes may go up, your insurance may go up, and you might see this coming a year down the road, and to not panic is definitely important.”
One other area that Hodzic admits might be hard for brokers to discuss up front is loan delinquency. No broker wants to bombard a brand-new homeowner with the thought that they might get behind on their mortgage.
“On the default side, borrowers don't understand their options, because you have multiple options available to you when you're delinquent that the average person may not know about,” he said. “It’s difficult to cover delinquency as a broker, because that's not something you want to talk about, but escrow is definitely something they can help borrowers understand.”
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