Mortgage servicers across the board got higher marks for their customer service in a recent survey, but even as distressed mortgage borrowers said they're more satisfied with their servicer today than they were one year ago, servicers with large portfolios of distressed loans were still ranked lower than their peers.
The three lowest-ranked companies on the 2014 J.D. Power U.S. Primary Mortgage Servicer Satisfaction Study are Green Tree Servicing, Nationstar Mortgage and Ocwen Loan Servicing, all of which are nonbank special servicers that have large amount of distressed mortgages in their portfolios.
"Their business model is more challenging and from a customer experience standpoint what we've seen year-over-year is that folks who are at-risk clients have more problems, more questions and more issues, and as a result tend to have lower satisfaction," said Craig Martin, director of J.D. Power's mortgage practice.
Green Tree, Ocwen and Nationstar have been active in acquiring mortgage servicing rights to distressed mortgages, the loans that other lenders like Chase, Regions and Wells Fargo have sold or attempted to sell. That could have factored in the improved scores at the upper end of the survey results.
Such MSR sales became a concern to regulators like the New York State Department of Financial Services, which put a halt to Ocwen's purchase of a nonperforming servicing portfolio from Wells Fargo amid fears that nonbank servicers, including Green Tree and Nationstar, were becoming too big, too fast.
Much of the portfolios at Nationstar, Ocwen and Green Tree are made up of customers acquired in the last couple of years. Issues with servicing transfers could have impacted the satisfaction score, said Martin.
There is always opportunity for these companies to improve their customer service, he continued, and Nationstar has embraced that philosophy.
Nationstar's 2014 customer satisfaction score of 658 was the largest gain among those listed in the 2013 survey, when Nationstar earned a score of 610. Green Tree received a 642 score in this year's survey, while Ocwen improved 19 points from the 2013 survey, from 649 to 688.
After the release of the 2013 survey, Nationstar met with J.D. Power to "dive into the deep detail behind what led to that score, to hear from their perspective what the customers were saying," said John Hoffmann, Nationstar senior vice president of corporate communication.
"We then took that information and had a team of leaders put together a plan," which concentrated on key areas for improving the customer experience, Hoffman said. Enhancements to the customer experience were already in the works prior to the 2013 survey, but the feedback consumers gave J.D. Power really drove the point home with Lewisville, Texas-based Nationstar.
Nationstar improved in all four areas that J.D. Power measures, with phone contact and billing and payment process seeing the biggest gains. Nationstar put a lot of effort into improving its interactive voice response system, Hoffman noted. The other areas Nationstar improved in were escrow account administration and its website.
The company was pleased with the significant increase in its score in this year's survey, but it's still not satisfied with its second-to-last position among the 20 servicers in the rankings. More meetings are planned with J.D. Power to discuss this year's results and Nationstar will continue its planning to improve the customer experience, Hoffman said.
"Obviously, we'd love to be higher in the rankings and we are working to get there," he added.
Ocwen and Green Tree did not return a request for comment.
Technology played a large role in the improved customer service scores, especially when it comes to distressed borrowers, Martin said.
"It is not surprising when you think about it. [Consumers say] 'I'm worried about making my payment. Every penny counts, I'm going to be monitoring it very closely,'" he said.
"It is very similar to what you see in retail banking, where people back in the day would call and use the interactive voice response system to check their statements and their balances. They are now going to mobile to do that," Martin continued. "It is the same idea among mortgage at-risk folks, who are very conscious about the payment; they are watching their account very carefully."
While consumers who are current on their mortgages have less of a need to regularly check on the status of their mortgage accounts, distressed borrowers could benefit from mobile technology that provides real-time account access and status updates, Martin said.
Another reason technology is driving increased satisfaction is that younger consumers are buying homes and are more comfortable with using technology an ongoing trend that J.D. Power has observed for a few years. And while there are still many consumers who prefer receiving a printed monthly statement, those consumers expressed a lower level of satisfaction with their servicers than those who go online to get information.
It is the "at-risk" borrowers who are leveraging mobile technology more to stay in contact with their servicer, versus the consumer who is on time with his or her payments, the survey found. For example, Nationstar rolled out a mobile version of its website late last year, Hoffman pointed out.
But it was not just the bottom portion of the J.D. Power rankings that showed improved results. The top company in this year's survey is Quicken Loans, a newcomer to the survey that earned a score of 835.
The company began servicing its loans on a full-time basis in 2009, although prior to that it serviced its production for the brief period before loans were sold in the secondary market.
Quicken has been a mainstay at the top of J.D. Power's separate originator survey that's released annually in November, holding the No. 1 spot from 2009 through 2013.
Quicken's success in both lists is no surprise, as there's a correlation between consumer satisfaction with the origination process continuing when the loan is being serviced, Martin noted.
J.D. Power has found opportunities regarding customer satisfaction in the post-closing process of putting the client into the servicing system. There are best practices that when executed effectively, help the servicing relationship, especially when the client had a great experience as the loan was originated, he said.
Historically, Quicken has been in the forefront when it comes to technology, and this has been true during its brief time in the servicing business. The company won the 2013 Mortgage Technology Servicing Trailblazer Award for a servicing system it created called Evaluates Prioritizes Integrates Calculates, or "EPIC."
EPIC is an automated decisioning engine used for a variety of tasks, including making standardized determinations of the best option to help borrowers in danger of foreclosure. EPIC can also evaluate the likelihood a loan will go into default and calculate the potential costs of a foreclosure.
For example, EPIC analyzes borrower behavior and performs statistical analysis on its servicing portfolio. In addition, the platform synchronizes with internal and vendor systems and integrates with Quicken's mortgage products.
There were two reasons why Quicken decided to retain its servicing. The first was economic: prices for servicing rights were at a low point following the mortgage crisis, said Bob Walters, chief economist for the Detroit-based mortgage banker.
Quicken also realized that retaining servicing rights were part of its mission to serve its clients over time. "To have a great experience through the origination process, then have someone else service the loan who may or may not adhere to the kind of standards and ideals we hold became more and more difficult," Walters pointed out.
There is a 400-person client relations group at Quicken, a segment of which deals specifically with servicing customers. So there is the same philosophy and culture on both sides of the business.
Employees are assigned to working with origination clients or servicing clients, although they can switch between the two functions after a while. Customers seem to appreciate that its entire staff is based in Detroit, Walters said, and Quicken Loans avoids charging borrowers fees for things like making online payments or setting up biweekly payment plans like some other servicers do.
The survey results found that the industry's average score increased to 754 from 733. Every company but one, CitiMortgage, saw an increase in its score. CitiMortgage decreased five points to 743.
BB&T, which had been No. 1 in the past four servicer surveys, had a five point increase in its score. But it slipped to No. 5 in the 2014 rankings because three other servicers had larger score gains: Chase (782, up 27 points), Regions Mortgage (777, up 13 points) and Wells Fargo Home Mortgage (772, up 11 points). There were a total of 20 firms listed, with three other servicers that J.D. Power said had a small or insufficient sample size to individually list: Caliber Home Loans, Franklin American Mortgage and RBS Citizens.
Some of the larger bank servicers, such as Bank of America, are making efforts to improve the client experience. B of A had a 26-point improvement in its score from 2013. The national mortgage settlement is one factor that has helped improve service standards at big banks. Settlement compliance efforts made over the last couple of years are now coming to the forefront and consumers are seeing that, Martin said.
That includes improved customer contact. "Communication and education goes a long way in helping to drive customer satisfaction," he said. Servicers should not be afraid to talk to customers; servicers should be proactive and explain why they are communication with the client.
Online contact typically has a higher level of engagement between consumers and servicers, as borrowers who receive paper statements typically just stick it in a folder and never again look at it, Martin said.
There is also a lot of information and other resources available online that a consumer can access. "The more at-bats to communication with your customer and the online space really gives you those extra touch points that's helping to drive better customer satisfaction," he said.
Federal mortgage regulations require some level of communication from the servicer when they put a loan into their system. But if the lender sends a one-page generic letter, it gets put aside by the customer, who feels that the servicer is not making an effort when it comes to customer service.
But those servicers who have personalized their contact with the customer tend to do better. The use of electronic communication lends itself to increased personalization, Martin said.
A change in survey methodology this year affected PHH Mortgage's appearance on the list. PHH was ranked ninth among the 18 companies listed on the 2013 survey, but was not included in the 2014 list.
J.D. Power spoke with PHH as well as others in the subservicing/private-label servicing business and found that because they do business in the name of many other organizations, it felt the data it gathered would not accurately reflection the companies' customer satisfaction performance. Similarly, consumers' attitudes about the brands PHH works for could also influence the results. As such, subservicers including Cenlar and Dovenmuehle were also excluded from the 2014 ranking.