Loan servicing transfers can be tricky to get right but making a mistake is not an option. Loans and their documentation are sent from one servicer to another in the form of “BLOBs”, or binary large objects, which are massive PDF files containing documentation, media and more.
In our previous article, we discussed the complications that can arise in the time-consuming and complex “de-blobbing” and post-transfer validations processes and how issues like inconsistent file naming, missing files, and error in data extraction can open loan servicers up to expense and risk.
But what many servicers don’t realize is that those issues can also harm your borrowers and degrade their customer experience.
Borrower confusion
A messy servicing transfer is, at best, a nuisance for your borrowers. Through no fault of their own, they’re left to deal with hassles like learning how to navigate different servicer websites, setting up new logins and passwords, figuring out who to contact with loan questions, and managing a growing pile of hello and goodbye letters from a revolving door of servicers.
At worst, a messy servicing transfer can leave borrowers with contradictory and incorrect information on their loan, such as loan numbers that don’t match, and autopayment settings that may have changed.
Imagine the frustration when, without the borrower knowing, the information linked to their “set and forget” payment changes. Now, a borrower who has been in good standing since day one is getting a call asking why they’ve missed a payment. This scenario is a headache for the borrower and the servicer.
Without effective, reliable communication from the servicer(s) during a servicing transfer, borrowers could be left in the dark on next steps they need to take, which can mean confusion and frustration and a potentially significant problem on the servicer’s side.
Retention concerns for the servicer
Borrowers don’t have poor customer experiences in a vacuum.
If a servicer routinely fails to provide the borrower with necessary information or alert them of changes that affect their mortgage loan, retaining that borrower in the future could become more difficult.
While the borrower may finish out the terms of their current loan, a poorly handled servicing transfer makes it far less likely that they will come back for something like a refinance or a home equity loan. That means servicers looking for repeat business may need to engage in continuous outreach to try and win that borrower back. However, if the experience was truly bad enough, they could be spending money every month reaching out to a customer who is unlikely to return.
There’s also reputational risk to consider. If servicing transfer errors happen enough times to enough borrowers, word could get around that homeowners are better off looking elsewhere for a stress-free loan process.
Reducing the headaches for borrowers and servicers
There’s good news for both borrowers and servicers when it comes to servicing transfers. Technology today can help automate the transfer process – before, during, and after – making it easier for acquisition teams to perform the work with fewer errors. Some technology providers offer professional services that can help train teams, guide the process or be involved in the servicing transfer process – helping with setting up naming conventions and mapping processes, to testing data and reviewing exceptions so both you and your borrowers are in the know from start to finish.