E-Closings and the Borrower Experience

Time has taken on a whole new meaning in 2020. While we wade through the likes of a pandemic not seen in 100 years, and experience interest rates lower than they’ve been in 50 years, we’re simultaneously moving at a feverish pace towards digital advancements like virtual house viewings and e-closings. As the digital change accelerates, lenders should be asking themselves, “What does this mean for the customer experience?”

E-Closings and the Borrower Experience

Remember the Wild West days of pre-TRID, when borrowers would often walk into closings having no idea what to expect? Thankfully, TRID (the Closing Disclosure specifically) has improved communication to the consumer, though closing problems still linger. According to MortgageSAT’s National Benchmark data, with a sample size of more than 140,000 year-to-date, one-in-ten borrowers still see unexpected rates or fees at the time of their closing.

Traditionally, one of the surest ways to address and resolve misunderstandings about rates and fees has been for the loan officer to attend the closing in person. The data supports this, showing the Net Promoter Score (NPS) 18 points higher when the originator attended (87 vs. 69). Yet, there has been a substantial wave of lenders moving to some element of e-closings, and because of pandemic restrictions that wave is building. Some sizable lenders are already reporting more than 60 percent of their loans are closing remotely. The truly remarkable thing: Their borrower satisfaction results are hitting new peaks.

The migration to e-closings is a slow-moving train, but it will arrive, and every lender will have to get on board sooner or later. STRATMOR survey data shows that in 2019, only 10 percent of lenders have any meaningful installation of e-closing capabilities, and the adoption amount that lender group was well below 50 percent. The good news is that late-adopters can learn from the companies who are already beginning to have success. Digital path-carvers have been able to focus on — and automate where possible — the touch points that matter most in the borrower journey as the closing approaches.

An originator’s primary role at the closing is to be a source of grounding for all the live wires at play. Whether it’s the borrower’s nerves, a late closing package, unexpected numbers, or inaccuracies on the documents themselves, a loan officer can answer questions and make phone calls to verify and clarify details. Being at closing also prevents the lender from being blamed for anything else that comes up — after all, if the buyer, seller, borrower, Realtor and title company are sitting around the table, and something goes wrong, who might be the convenient person to blame?

A look at the numbers tells us how impactful this can be. When a borrower is surprised by their rates or fees at closing, NPS drops by 64 points, all but forfeiting the goodwill needed for a referral to friends or family.

Chart 1

Source:MortgageSAT Borrower Satisfaction Program, 2020.

And when a borrower finds inaccuracies on their closing documents, there is an even larger drop in NPS of 81 points. That’s a sizable amount of goodwill and potential organic growth going out the door.

Chart 2

Source:MortgageSAT Borrower Satisfaction Program, 2020.

Customers with a bad experience are not only more likely to share their experience than the happy ones, but they also tend to share with more people (the majority share with five or more). In addition, negative customer experiences with surprise rates and fees can lead to unflattering social media reviews, compliance issues and worst of all, BBB or CFPB complaints.

The key for originators is to find ways to stay engaged, even when they can’t attend the closing. This may mean finding digital ways to interact with the borrower during their review and signing of the closing documents, or it may mean finding other appropriate, social-distanced ways to interact in a face-to-face setting.

What’s a Lender to Do?

Here are three things that best-in-class companies are doing to make sure e-closings go as smoothly as in-person closings:

1. Virtually Attend Closing: We’re seeing a new trend where originators are getting on FaceTime — or at the very least, a phone call — to attend closings. In July and August, five percent of closings included a virtually attending LO, and the number is growing. The best part? NPS on loans with physical attendance and virtual attendance was exactly the same at 91.
2. Schedule a Separate Time to Review Closing Docs: E-closing docs often become available at 12 a.m. — the middle of the night — which is not exactly an opportune time for the originator to hop on the phone and walk the borrower through the documents. Schedule a convenient time with the borrower for the following morning to review the Settlement Statement and the Note. If there are going to be any questions or confusion, it will likely involve one of these two documents.
3. Attend the Walk-Through: Once the pandemic subsides and we’re back to in-person interactions, originators should consider physically attending the borrower’s final walk-through. In cases of e-closings, attending gives the originator a chance to have some face-to-face interaction, is a critical component in garnering referral business, with the borrower and the real estate agent(s) involved. It also makes for a great photo opportunity!

How can you learn more about creating a better customer experience and about how the customer experience impacts your company?

Find out more about STRATMOR Group’s CX services and how transparency into the loan process can help your company. Contact Mike Seminari at mike.seminari@stratmorgroup.com.