Mortgage Advocacy and Support

This is the 12th article in our Mortgage Life Cycle Costs series.

What do we mean by Mortgage Life Cycle Costs and why write so much about this seemingly unimportant topic? Isn’t a mortgage just about the lowest rate? See the 1st article in this series for a more complete explanation, but briefly stated, Mortgage Life Cycle Costs are significant, but potentially avoidable mortgage costs that you could/will incur during your mortgage term that might far outweigh the benefits of a slightly lower interest rate, if you over-focus on interest rates and minimize the mortgage product itself.

We have seen many people suffer loss, because they allowed themselves to be distracted by interest rates. Why do we believe interest rates might be a distraction? Canada’s largest banks are a saturated oligopoly. Oligopolists are typically very large and interdependent of each other and therefore usually don’t risk competing by price [interest rates for mortgages], instead they compete by image, retention, etc. A quick review of banks’ websites should confirm our banks’ oligopolist relationships with each other; interest rates are very similar and widely published but very little if any details or education is available about the retention power of their specific mortgage products, terms & conditions etc. So, why over-focus on obvious interest rates if banks’ rates are similar and not the primary way that they compete? Shouldn’t we be more concerned about what they are not telling us? Wouldn’t we get better mortgages if we ask more questions about their mortgage products, terms & conditions and potential consequential limitations and costs? We think so, and hence our Mortgage Life Cycle Costs articles. In this series we attempt to cover topics that could impact your mortgage life cycle costs and potentially wipe out the relatively small gains from your slightly reduced rate mortgage.

In this 12th article we will discuss how client support and advocacy, or lack thereof, can impact your mortgage and cost you money. You may be wondering why spend an entire article on these two seemingly negligible topics? Surely you shouldn’t choose your next mortgage based on the level of support and advocacy you can expect? What is good support and how could you know whether you might be supported? Not only will this article try to answer these questions, but we also hope to show you that client support and advocacy can be a lot more than just nice-to-have, qualitative concepts, they can have money consequences. Once you’ve read the article, we think you’d agree that client support and having someone in your corner when you need it should be included in your mortgage life cycle costs evaluation list when choosing your next mortgage.

INTRODUCTION

This article refers to client support and advocacy needs after your mortgage has closed. Let’s define what I mean with client support & advocacy:

Client Support/Service: Assistance and advice provided by your lender based on your needs. E.g., payment changes, pre-payments, mortgage porting, early renewals, etc.
Advocacy: An advocate is someone who works and argues in support of another’s cause. E.g., someone impartial and trustworthy you can turn to for mortgage advice, verify mortgage payout penalties, etc.

Note: Client service and advocacy can be very similar, so I may unintentionally interchange the two terms.

I believe most mortgage lenders attempt to provide good client service. The mortgage business is very competitive and complex, so it’s not easy for lenders to train all their staff on all their products and provide flawless service. While I may highlight mistake or seemingly poor practices, my goal is to educate and help my clients and not to simply criticize for controversial or sensational value. I trust you read the article from this perspective.

CLIENT SUPPORT

Have you ever known more about a product than the customer service rep that was supposed to help you? Has your sales guy ever referred you back to the customer service rep who couldn’t help you before? Poor customer service is near the top of my dislike list and if you’ve been a citizen of planet earth for more than a month you probably relate.

Maybe there is a reason why poor client service is so prevalent. Maybe understanding poor client service contributors will help us to ask better questions of our suppliers and consequently minimize our poor client service situations. While I am no client service expert, I have noticed two things that contribute to poor or excellent client service:

Efficiencies: To survive and be competitive, businesses must focus on sales and profit. To most businesses aftersales client service is a cost centre, so we should expect salespeople to be compensated higher and separated from client service duties. Consequently, our aftersales experience will almost certainly be lesser than pre-sale.

The mortgage industry normally services its clients in the following ways:

Web Portal: View your mortgage balance, status, retrieve mortgage statements, etc. While very convenient and essential, this method is increasingly becoming mortgage lenders’ primary client service method.
Electronic Communication: Communicate with your lender by email, chat, etc. You should expect a reply from a call centre member with limited mortgage experience.
In-branch: Visit your local bank branch and meet with an unknown advisor who didn’t place your mortgage, sells many financial products and who will most likely be rotated to their next branch shortly.

Phone Support: Contact the lender by phone. You should expect to speak to a scripted call centre member with limited mortgage experience.
Personal Support: Access client service by any of the applicable methods above and/or from the salesperson who placed your mortgage. This is very, very rare, but clients benefit, and salespeople are kept accountable for the mortgage products they sell.

What can you do about it? Check for evidence that your mortgage salesperson can and will provide aftersales client service.

Compensation: Salespeople are compensated and incentivized to sell. Like most of us, our compensation determines our focus, and often also our business behaviour. So, if a salesperson is prohibited from or isn’t incentivized to provide aftersales service, they probably won’t.

Almost all mortgage salespeople are compensated upfront and only incentivized to sell. Most mortgage lenders won’t allow salespeople to provide aftersales client support. Are such policies in your best interest and what are some of their consequences:

Client Service: While your salesperson might empathize with your aftersales problems, they will refer you to client service to solve them.
Sales Opportunities: Since they aren’t incentivized to solve them, your salesperson might try to convert your client service problems into sales opportunities.
Fewer/Limited Options: From my experience lenders’ support staff are not as knowledgeable as their mortgage salespeople, so unless it’s simple, most clients don’t ask complex mortgage advice from support staff. Consequently, clients can miss out on savings or other opportunities.
Retention: Should you wish to; it can be harder to move your mortgage to a different lender without your salesperson’s support.
Churning: Most lenders not only don’t compensate their salespeople for mortgage renewals, but they also compete with their salespeople at renewal time. Hence, lenders unintentionally incentivize salespeople to either move your mortgage to a different mortgage lender or justify something else so that they can be compensated.

What can you do about it? Verify the following when choosing a mortgage lender:

Lender Philosophy: Does your lender allow your salesperson to support you after the mortgage closing? If the lender doesn’t your salesperson won’t be able to even if they want to.
Compensation: Check how your mortgage salesperson is compensated. If their entire compensation is upfront, they are not incentivized to support you and probably won’t.
Cost: What is the cost to the salesperson if they moved your mortgage from one lender to another. If the salesperson only gains, their suggestions might conflict with your interests.
Support Staff: If your salesperson is incentivized to provide client support and they have support staff, dedicated to client support, directly under their supervision, there is a high likelihood that you can depend on them for aftersales support. If not, your salesperson might not have the resources to support you.

ADVOCACY

Mortgage salespeople, including mortgage brokers, are bound by lender terms and conditions. So, just like you, we are unable to circumvent your mortgage’s terms and conditions. However, an experienced mortgage broker can be a great advocate when you need them.

If a mortgage lender doesn’t incentivize or excludes salespeople from its aftersales service your salesperson probably won’t support you in a meaningful way.

Here are a few examples when you might want advocacy:

Mortgage Renewals: Who presents your mortgage renewal to you when your mortgage term matures? If it’s not your salesperson, how do you know you will be receiving a competitive renewal offer?

Mortgage Nuances: Not all mortgage terms & conditions are created equally and since client service reps’ roles are usually not strategic, they might not exploit all your options. E.g. Lenders don’t offer convenient, moneysaving accelerated monthly payments, but are these payments possible?
Limitations: If you wish to make additional payments should you just increase your regular mortgage payments or is it better to make pre-payments? Does your lender allow regular, automated prepayments with every mortgage payment? The option you choose can have major consequences for your future plans.
Viability Determinations: Trustworthy advocacy is invaluable when you need to make important, strategic mortgage decisions. E.g., If interest rates decrease, will your interest savings exceed your payout penalties? Should you renew your mortgage at its actual or contractual amortization?

I have noticed that a mortgage lender’s aftersales service philosophy can be a great predictor not only of the aftersales service you can expect, but also of the quality and transparency of its products. So, don’t be distracted by obvious interest rates, you might discover hidden mortgage life cycle costs when you pay attention to a lender’s philosophy, product terms & conditions, etc.

Most of my client service and advocacy examples in this article can have cost implications; therefore, we should take customer service seriously. Good and dependable mortgage support can save you money and help you to be mortgage free faster than your neighbour and his DIY mortgage.

Disclaimers:

The opinions expressed in this article are the opinions of the author only and not of anyone else or any other entity.
Not legal, economic, financial or any other advice.

Not for decision-making purposes.
Subject to eligibility, lender approval and terms & conditions
In any and all cases of any conflict of any kind about anything whatsoever, lender rules, guidelines, terms & conditions, interest rates, etc., supersede presented information.
Subject to change in any or all ways, at any time, without prior notification or warning.
Does not include all, may exclude some and/or may only partially represent guidelines, mortgage rules, scenarios, topics, etc.

Not specific to any particular mortgage lender or mortgage related product, information may be inconclusive, incomplete and/or covered somewhere else, etc. Products, underwriting guidelines, etc. vary between lenders.
Highlighted, bold, capitalized, italicized, text is for effect only and cannot be separated in any way from the rest of the information.
Subject to all borrowers seeking independent professional advice from any and all providers as determined solely by the borrower, at the borrower’s own and sole discretion, prior to applying for or making changes to a mortgage/loan.
E.&O.E.