A recent survey found some worrying knowledge gaps among American homeowners
STRATMOR Group recently released the findings of its COVID-19 Homeowner Experience Report. Based as they are on survey data collected at the tail-end of April, some of the findings – concern over mortgage payments, changes to work life – can, at this point, be taken for granted. But one particular question around borrowers’ understanding of what COVID-19 assistance programs are available to them shows a lack of financial literacy that is as shocking as it could be financially devastating.
In findings STRATMOR describes as “disconcerting”, 13 percent of survey respondents said they were under the impression that either the government would be making their mortgage payments for them (five percent) or that they could simply skip them (eight percent). Over a quarter of respondents had an accurate read of the situation, that mortgage payments can be postponed during the pandemic, but 36 percent said they “have no knowledge” of government COVID-19 assistance plans.
“Thirteen percent of them have it dead wrong,” says Garth Graham, senior partner at STRATMOR, who adds that the company kept the language of the survey as neutral and consumer friendly as possible to ensure accurate responses. “Half the people [surveyed] really don’t know.”
It's obvious there is a significant knowledge gap when it comes to the average American borrower’s understanding of what COVID-19 means for the health of their mortgage. Graham lays part of the blame on a culture that is increasingly comfortable getting most of its news from headlines. But a nuanced, novel concept like mortgage forbearance can’t possibly be summed up in a few words.
“If they’re only getting their information from the headlines, they’re getting it wrong,” he says.
That lack of clarity, Graham explains, has been exacerbated every time borrowers have been told to contact their lenders if they have questions or concerns about forbearance and the current state of their mortgages, not their mortgage servicers.
“The lender and the servicer are never quite the same thing,” he says. “In a very high percent of cases, it’s not even the same company. So when you say, ‘Call your lender,’ it’s like, ‘The guy that originated my loan or the people I make my payments to?’”
As much as COVID-19 has helped sow confusion in the minds of borrowers, it’s another sign of a long-running, underlying problem: many homeowners simply don’t know who their servicers are or what they do. If the upcoming wave of defaults many in the industry fear is building does in fact materialize, these clients, desperate for a quick solution, may wind up taking their concerns to the wrong people – or approaching the right people far later than they should.
Graham feels now is the time for servicers to step up and ensure that doesn’t happen. In addition to ensuring their clients are aware of the generally informative resources made available to them by Fannie Mae, Mortgage Bankers of America and the Consumer Financial Protection Bureau, servicers must also be working to provide clients a frictionless process that will result in quick response times and single-call resolutions in case their loans turn sour.
“Sometimes these require a little more information, so you need to design a process that may require a higher level of interaction and effective follow-up,” he says. “Get them in the process early, make it a whole waterfall with a kind of nurturing campaign through the process, and give them some automated tools to do it.”
The will is there, but, as Graham explains, the same level of digital innovation that has allowed lenders and originators to creep ever closer to offering a fully digital loan origination experience has yet to take place in servicing. That kind of transformation is unlikely to happen in the next few weeks, so it will be up to servicers to arm their clients with as much knowledge and access as possible between now and when their forbearance periods come to a close.
Because if a wave of defaults does rise up to swamp the industry and the nation’s servicers go into Armageddon mitigation mode, the time for education will be over.
