In the first seven weeks of COVID statewide lockdowns, 30.3 million Americans filed for unemployment and 7.54% of mortgages (3.8 million) went into forbearance. These forbearance numbers will rise during Q2 2020, and as many progress into loan modifications in Q4 and beyond, customer care at scale is critical to support stressed homeowners and keep them in their homes.
In this piece, part two of our COVID customer care series, we’ll examine how the COVID economy will worsen before improving, three things your customer care technology must do as forbearances become loan modifications, and how you can save money while improving customer care.
How Long Will COVID Economy & Housing Worsen Before Improving?
Thirty million jobless claims in the first six weeks of COVID lockdowns erased all job gains since the Great Recession, GDP declined 4.8% for Q1 2020, and Goldman Sachs’ economics team predicts a drastically worse -34% GDP for Q2*.
The only bright spot in the Q1 GDP reading was a +21% contribution from Residential Investment, thanks to an unseasonably warm winter and low rates leading to a strong January and February.
But Bank of America’s economics team predicts a “decisively weak” housing market in Q2 and beyond as follows:
- Existing Home Sales down 27%, from 5,483,000 in Q1 to 3,973,000 in Q2 (saar)
- New Home Sales down 44%, from 726,000 in Q1 to 404,000 in Q2 (saar)
- Housing Starts down 48.5%, from 1,466,000 in Q1 to 755,000 in Q2 (saar)
- Home Prices (Case Shiller) down 124%, from 4.2% in Q1 to -1% in Q4 (% YoY)
The good news is that conditions may improve fast. Goldman predicts GDP will recover to +19% for Q3 and +12% in Q4*.
Economic recovery this sharp combined with regulators backing servicers on CARES-mandated 12 month forbearances could mean a soft landing for housing a year from now.
But it’s unlikely all 30.3 million people who’ve lost their jobs so far will all return to work imminently.
Accordingly, consensus estimates call for 2020 unemployment to hit 15% mid-year and settle around 9% by year-end — up sharply from 3.6% to start the year.
So your window to modernize loan modification and customer care technology is right now.
What We’ll Learn About Borrowers & Loan Modifications Between Now and September
If we take the initial forbearance wave forward from April, you’ll get early modification signals from homeowners at July’s 90 day mark and clearer signals in September when homeowners are approaching their 180-day mark.
Between now and July, we’ll also get clarity on loan modification programs and guidelines out of Washington.
This gives you time to get the process down.
Remember how it went after 2008?
You didn’t have the omni-channel technology to educate and engage homeowners across a (sometimes) long and complex modification process.
Today, consumers expect this technology to help them manage their process and communication.
Now let’s look at how loan modification customer care is setting up in this market.
3 Things Customer Care Tech Must Do As Forbearances Become Loan Modifications
Servicers are currently talking to each customer for about 7 minutes to handle forbearances.
COVID unexpectedness aside, 7 minutes per forbearance call isn’t overly taxing on servicer resources.
But this number will rise. According to Sagent’s servicing clients, loan modifications take much longer.
It can take 3 to 5 calls of 30 minutes each to handle a loan modification.
Requests for forms and documentation increase as these call sequences progress.
And new documentation will continually change your loan modification offers and instructions.
Given this, here are three things servicers must have in their technology to provide world class customer care and lower cost while managing loan modifications:
1. Your customers must be able to do this from any device:
- View real-time updates on key data about loan and modification offer(s)
- Send and receive secure messages and documentation
- Request and monitor status updates throughout the loan modification process
2. Your customer care and loan modification functionality must be able to:
- Configure various decision outcomes for each type of loan modification scenario
- Maintain compliance by observing all Federal, state, and investor regulations and guidelines
- Configure, automate, and sync workflows and data with all related systems
- Let you take over and help a customer directly with their consent
3. Your team and consumer facing systems must:
- Provide a singular experience by sharing data in real-time
- Control available information and actions presented to borrowers
- Integrate third-party engagement tools
How Are You Making Tech & Resource Decisions Before Loan Modifications Hit?
Some servicers today are hiring heavily to prep for the loan modification wave that’s coming.
Others are looking at outsourcing to third-party companies that specialize in customer care.
In both cases, Sagent powers servicer and outsourcing teams to be in command of what’s coming, and drastically lower cost.
As America’s second-largest servicing fintech company since launching in 2018, Sagent plays a vital role modernizing how banks and lenders power the homeownership and consumer lending experience for 12 million borrowers and growing.
Our borrower-first approach rethinks homeownership from a customer care, retention, and engagement perspective.
This approach lets you ease borrower stress and increase confidence in your brand while ensuring compliance with forthcoming loan modification programs.
How well these loan modifications work will dictate how much loss mitigation is needed. More on that in the next installment of our customer care series.
Stay tuned, and please reach out so we can explore a partnership.
Footnotes: The first of three GDP readings was -4.8%. As of this writing, here are Goldman Sachs predictions for the initial and final readings of 2020 GDP by quarter: Q1 initial -4.3%, final -8%; Q2 initial -19%, final -34%, Q3 initial +9%, final +19%, and Q4 initial +12%, final +12%.