Text messaging with borrowers? Yes, I think so …

Article By: Ben Giumarra, Spillane Consulting Associates, Inc.

You know, I could have put in a clickbait headline like “Click to see biggest improvement to customer service in mortgage banking (which happens to be free). 

Let me begin boldly: allowing employees to communicate with consumers via text message during the mortgage origination process is the single most dramatic improvement in customer service that most mortgage departments could hope to accomplish in the short-term.

What this is NOT

This has nothing to do with marketing via text message, or using expensive “text alert” systems to generate boilerplate notices. That’s not “texting”! I’m talking about actually just allowing text messaging as an alternative to speaking to a representative on the phone.  A borrower might text an originator or processor: “Hey can we meet to go over the loan on Friday morning?” “Hey did you receive all my paperwork?” Employees might text: “Keep eyes peeled for documentation. Need to sign those as soon as you can.” “Just a note that we’re still missing your paystub. Call me if you need any help.” ” Everything is good on your end, you should expect a package in the mail in the next couple of days.”

Current Status & Future State

I realize most institutions don’t allow this (at least officially) currently. And I’ll concede that it might not be worthwhile for some institutions. But we have to face some realities: A growing number of consumers prefer to communicate via text message. Statistics show that text messages are opened at a much higher percentage than e-mails or “snail mail.”  Another reality is that text messaging is becoming a normal part of the real estate transaction process – you’ll see some states recognizing the validity of “written” offers through text messages. Real estate agents are searching for ways to store text messages as legitimate transactional records. Many financial institutions are rolling out some form of text message solution – Umpqua, Citizens, US Bank, BB&T, Rockland Trust, Eastern Bank, are a few quick examples. Finally, the cold hard truth is that many mortgage originators are already doing this. As a compliance officer, would you rather get a handle on this now, try to enforce an outright ban, or pretend it isn’t happening? I like the first option.

Recommendation & Best Practices

So I searched high and low for any regulatory compliance roadblocks to allowing people to text message borrowers during the origination process. I don’t see anything that should prevent an average institution of implementing a policy permitting text messaging. You might say, well this sounds dangerous – how can we avoid risks with this? My response is twofold: First, I don’t see this as much riskier than phone calls that are currently going on. Second, of course there are some risks – here is my list of best practices for an institution that goes forward with text messaging.

1) Avoid regulatory triggers.

Text messaging will be very useful without the need to go so far as to trigger rigorous regulatory requirements for record retention and disclosures. For example, don’t allow advertisements through text messaging – standard CFPB examination instruction include:

“Evaluate the lender’s advertising materials and disclosures across all media, including: print, television, radio, telephone solicitation scripts, and electronic media including the Internet, email, and text messages.”

Additional limitations could include:

  • Avoid communicating anything that would require an NMLS disclosure (aka discussing rate/terms)
  • Avoid the transfer of non-public personal information (triggering cybersecurity concerns)
  • Do not use text message to deliver messages that are important from a regulatory perspective –  such as providing a disclosure, denying a borrower, communicating a counteroffer, getting permission to change the terms of the loan. These are all items that we would need to keep a record of in the loan file – this complicates the text messaging feature.

2) Limit to Company Phone and/or System

I think a good policy would be to prohibit any text messaging from personal devices. Like it or not, eventually you might come across a Tom Brady/deflated football situation – and having all text messages done through company devices and/or through a company system will allow you to keep records of text messages. Despite what you may think from watching movies about the NSA and FBI – text messages are hard to get back and most major carriers will not be able to reproduce text messages. There are different systems available – but many institutions could offer text messaging simply through whatever e-mail system they use without the need to add any additional software or system. Did you know you could send text messages through e-mail? You can! And it’s surprisingly easy. All you need to know is which provider they use. For example, I’m on Verizon – so you can send me a text message through e-mail by e-mailing [email protected], thus saving the text message in the same way as any e-mail would be saved.

3) During Transaction Only: Not Before or After

If you want to keep this as simple and risk-free as possible, permit text messaging only after the borrower opts in at application and until the loan closes. Using this at later times or for marketing adds complexity and risk.

4) Conversation Log

Depending on whether your system capabilities, require employees to add notes to a conversation log for loan file documentation. The same way they currently may add a note about a phone call or even e-mail from a borrower. Not repeating word-for-word, but providing enough information to create a paper trail.

5) Employee Waiver

Don’t forget to execute any necessary employee waivers beforehand- putting them on notice that those messages are not private and will be monitored.

6) Policy & Procedure

Having a text messaging policy and/or procedure seems like a good idea. The good news is that much of this can be adapted from what you currently have in place to control phone calls.

In Other News

  • Heard about this NY Times blog post providing a historical take on the American dream from my friend Jeremy Potter. Author provides an interesting perspective, prompting readers to consider when we started

         “[c]onflating the American dream with expensive housing.” 

  • Hey exciting times around here at SCA – with none other than Mr. Bill Dolan coming aboard. Just like anyone else here, he’ll be out looking for problems/concerns that our clients have, and then obsessing over how to help them in any way possible.
  • Read here about the recent Massachusetts enforcement action, which includes a $500k fine and is related to debt collection. If you’re collecting debt in MA, good idea to review what happened here and avoid doing the same!

On My Mind …

What Interesting article in the HBR called How People with Different Conflict Styles Can Work Together (free). Probably common sense to most people, but if you have the time I found it helpful. It talks about how people can get along dispute having different way of settling disputes. Some examples from the article:

Aggressive to Avoider

If you’re working a colleague who avoid conflicts but you are the opposite, more aggressive, there will be a tendency for you to “bulldoze” that person into agreeing with you. One of the recommendations in this instance is that you take extra care to be patient with the pace of the conversation.

Aggressive to Aggressive

In another scenario, where both you and your colleague are aggressive (and don’t try to avoid conflict)- the article notes there is a risk that “in the heat of the moment, you might end up saying things you don’t actually believe.” One of their tips for this scenario: “Since you’ll both be eager to address the situation, take extra time to prepare for the conversation.” 

“My purpose is to master myself so I can serve humanity as a warrior, leader and teacher.”   – Mark Divine, Unbeatable Mind

Thank you to Ben Giumarra, Spillane Consulting Associates, Inc., a member of our Education Committee, who with the support of other experts at SCA have put together this newsletter.

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