In April, the Consumer Financial Protection Bureau (CFPB) released a report titled Mortgage Closings Today that summarizes the key challenges generating consumer frustration around the mortgage closing process. Their assessment is based on data collection efforts that included reviews of consumer complaints, analysis of closing packages, industry interviews, an RFI calling for consumer and industry comment, and more. The purpose of this analysis was to shape their approach to achieving their long-term vision of a mortgage closing in which the consumer is “an empowered, knowledgeable homebuyer experiencing a more efficient, consumer-friendly process.” The CFPB’s resulting view is that electronic closings (eClosings) combined with the reduction and simplification of the documents in a closing package is how they can best achieve this vision, and I believe this approach is right on target.
To add further to their perspective, I thought it would be interesting to look more closely at best practice methodologies in customer experience design and management to see what guidance they could offer in the re-thinking of mortgage closings. Having spent over a decade working for a customer service outsourcer, I know that the field of customer experience management (CEM) has some very well-developed practices. One newer reference that I particularly like is The Ten Principles Behind Great Customer Experiences by Matt Watkinson. Watkinson recently received Management Book of the Year accolades for 2014 by the UK’s Chartered Management Institute. Of the ten principles he espouses, I found five that are easily relevant to the design of a more consumer friendly mortgage closing.
Satisfy Customer’s Higher Objectives
The highest objective in getting a mortgage is the actual purchase of the home – the acquiring of that proverbial American Dream. That’s why those in our industry fixate so intently on on-time closings. Financing and move dates have been carefully lined up so that buyer and seller can respectively turn over the keys and move in and out in sync. Anything that delays this carefully orchestrated timing will most certainly leave the consumer unhappy. The use of technology to reduce errors or discrepancies and simplify the signing of documents helps minimize this risk. Unexpected closing delays are most often caused by last minute corrections that require a restatement of all the closing paperwork. The CFPB’s new rule requiring lenders to provide consumers with closing documents three days in advance is intended to give consumers more time to review documents, partly so that errors and discrepancies can be caught. But the rule has the potential to also hurt consumers. Even if errors are caught before closing, if it’s within three days and the errors are beyond tolerance ranges, the close date must be re-scheduled.
There are other equally important objectives to a mortgage closing that consumers often don’t fully appreciate, either because they don’t sufficiently understand the financial implications of committing to a mortgage, or because they are rushed so fast through the paperwork that they don’t have time to contemplate their actions. Here is where eClosing technologies alone are not enough. To truly enhance the consumer’s understanding and empowerment, closing documents need to be simplified and reduced in number. The new Loan Estimate and Closing Disclosure are monumental first steps in this direction. I am hopeful (and eager to see) that these important forms will do a better job of helping consumers understand the details of their mortgage and what they are financially committing to, but the effort can’t stop there. Even though a majority of the closing documents are owned or regulated by other stakeholders, the CFPB has to continue taking a leading role in reshaping the format and nature of closing documents.
Leave Nothing To Chance
A well-designed customer experience takes into account every possible detail from beginning to end. As Watkinson notes, “We care about details, because they show that the business cares about us.” In fact, it’s the attention to detail that often makes the difference between an acceptable and superb experience. The CFPB has described some of the measures it thinks would improve consumer understanding, empowerment and efficiency at closings. These include ideas such as prescribing a specific order in which documents should be viewed, providing explanatory information up front to describe the meaning and importance of the documents in the closing package, and online access to educational resources if they have questions about terms or terminology. A closing process designed from the consumer’s point of reference, and with attention to every detail will create a much more understandable and positive closing experience.
Make It Effortless
Any time you can make things simpler, more convenient or faster, customers are likely to be happy. In the world of customer service and support, the latest research suggest that reducing the amount of effort a customer has to make in order to resolve problems is a much stronger driver of long-term customer loyalty than the conventional wisdom of exceeding customer expectations or “delighting” customers through above-board service. This simple insight has profound implications in the world of service and applies equally well to customer experience design. Obtaining a mortgage is not something consumers should take lightly. They certainly SHOULD put forth effort to review the terms and obligations of the mortgage, to understand what title insurance is and what it does and doesn’t protect, to rationally assess their own financial ability to repay the mortgage, and more. There are, however, ways to reduce some of the process effort so that closings are easier. Electronic signing is one such example. A “click-to-sign” signature process helps complete documents quickly and easily. So does the use of a “Next” button to move the consumer through documents efficiently, stopping at all areas that require signature or initials. Some consumers may prefer not to read large volumes of documents electronically. Providing an easy-to-find print button would be a welcome convenience.
Make It Stress-Free
The CFPB reports hearing from consumers who say they “often felt pressured to sign documents during the allotted time in order to avoid risking delays or even losing the house.” Furthermore, the CFPB found that “the timing of delivery was the most commonly cited challenge… appearing in 43 percent of [consumer] responses.” For this reason, the sending of documents to consumers in advance is one of the most important improvements the CFPB believes it can make. This is what drove the CFPB to hold firm with their requirement for lenders to provide borrowers with the new Closing Disclosure form at least three days prior to closing. However, we have to remember that having additional time is only one aspect of reducing stress. Just because consumers have more time to read the documents doesn’t mean they will understand them any better. This is why form and document re-design is needed. At a minimum, we have to look at ways to provide consumers with access to expert resources or information when they need it. To this end, Watkinson describes several techniques that can be used to reduce stress, including:
>> Considering the consumer’s level of competence – Consumers have different levels of comfort and familiarity with financial terms and legal language. Where possible, easy access to definitions or additional resources should be provided.
>> Clarifying the reason for the task – Consumers often don’t understand the purpose of many of the documents in a closing. Not knowing what you are signing certainly creates additional stress. Providing simple and clear explanations of what each document is and why it is important can help alleviate the consumer’s concern. Typically, the settlement agent is the one providing these explanations. If consumers are instead reading documents on their own, a “read this first” reference guide could be quite helpful.
>> Providing responsive feedback – Not knowing how long a process will take or what comes next can be unsettling for many. This kind of stress can be alleviated by providing a visual indication of progress made. For example, each time a document is completed, a check mark can be displayed along with a countdown of how many additional documents remain until completion.
Set and Meet Expectations
Notwithstanding the hyperactive refinancing market of recent years, where some consumers refinanced mortgages multiple times within a few years, most homebuyers go through a mortgage closing only a handful of times in their lives. It’s therefore rather difficult to know or remember what to expect in the process, especially for first-time buyers. Setting expectations up front about what the consumer is going to go through during closing, and then meeting those expectations, will go a long way in creating a positive closing experience. In an eClosing, this can be done by providing an overview document which is presented to the consumer first, before moving ahead with the actual review and signature of documents. The overview document should explain, for example, what happens in the closing process, the kind of documents the consumer will be reviewing, where to go for help, and more.
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This is an exciting time for those of us in the field of paperless or electronic workflows. Thanks to a healthy push from the CFPB, the vision of a complete eMortgage, which initially formed many years ago, but then stalled due in no small part to the financial meltdown, is likely to get back on track. All of us – vendors and lenders, alike – should look to the principles of great customer experience design to help make us as successful as possible.
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