Closing, document gathering issues weigh on borrower views of lenders

Problems with document collection and processing, in addition to snags in the closing process, damage borrower opinions of the mortgage lender and origination experience, a survey from Stratmor and Snapdocs found.

Those two areas are responsible for a combined 85% of a borrower’s overall satisfaction with the lending process, the study found.

“This is one of the first in-depth studies that goes into detail on specific phases and pains in the mortgage process, including document collection and closing,” said Todd Maki, Snapdocs’ vice president, in a statement. “What we can tell is that lenders who do invest in technology and process improvements are seeing the impact, usually in the form of faster, more convenient and more transparent borrower experiences, all of which correlate with higher borrower satisfaction.”

Lenders have put effort into solving satisfaction issues around the application process and that showed in the results. Stratmor research over the past decade found this had been a pain point for consumers.

“Given the recent history of strong technology investments into the application process, it is reasonable to conclude that lenders are realizing the returns of these technology investments in the form of bolstered customer sentiment,” the survey report said.

In fact, borrowers who requested help completing the application gave their lender a two point higher net promoter score [NPS], which is a measurement of customer experience.

But repeat documentation requests during the underwriting process has also long been a sore point for consumers. The application process, which included scenarios in which supporting documents were requested multiple times, was the second-largest pain point for consumers in a 2017 Stratmor survey. Having more than one kind of mortgage application issue was the biggest difficulty. 

The overall ease of providing documents to the lender was rated 7.87 out of 10. That was the lowest score out of all the areas consumers were asked to rank a process’ ease.

While only 9% of respondents considered their lender’s document requests to be unreasonable, it caused a 70 point drop in the NPS, the most significant impact to borrower experience of any other phase in the mortgage process.

At the same time, 36% of borrowers claimed they had to provide documents more than once. This aspect caused an 11-point drop in the NPS.

Borrowers gave the pre-closing and closing process a higher ease of process ranking, but at the same time, errors caused a hit to the NPS.

Maki pointed to Stratmor data that showed 50% of lenders had yet to invest in digital closing technology. “This study shows there’s tremendous opportunity to measurably improve the closing experience,” he said. “More generally, technology investments in customer experience tend to get deprioritized, especially if lenders are too busy or too cost-conscious, because it’s difficult to directly tie ROI to these investments.”

On that same one-to-10 scale, borrowers rated their lender at an average of 8.11 when asked if they felt prepared in advance for what took place at the closing table. While only 12% said they did not have the opportunity to review their closing documents, it drove down the NPS by 33 points.

Ease of closing received an 8.19 point ranking, but a significant share, 38% of borrowers, said they had a problem during closing.

Closing speed was an issue cited by those surveyed for a recent report by National Mortgage News’ parent Arizent.

The most cited issue in the Stratmor/Snapdocs survey involved confusing paperwork, followed by the interest rate not being what the borrower expected. Other significant problems included fees not being what was expected; the closing not starting on time; missing documents; and inaccurate paperwork. Missing docs and rate expectations caused the biggest hits to NPS score.

Fixing one of those areas could improve the NPS by 33 points, the report said.

However, right now, lenders have gone from an abundance of cash from outsized margins in the third quarter of 2020 to originating loans at a loss of $82 per loan in the second quarter, according to the latest data from the Mortgage Bankers Association. Only 57% of the mortgage lenders in the MBA study were profitable.

As a result, lenders are watching their spending, and technology typically gets caught in this web.

“Investing in technology that focuses on and improves areas of the process that have not been previously invested in will provide the greatest return with limited resources,” said Maki. “However, these investments will only produce significant returns if technologies are used at scale and across all loans.”

Stratmor and Snapdocs surveyed over 7,000 borrowers who have completed a mortgage transaction within the past nine months, with 69% getting a purchase loan and 31% a refinance.