Moving in on Mortgage Delinquencies

Here's a stat that'll unnerve most financial services executives: The rate of U.S. mortgages in default rose to 2.87 percent in the first quarter of this year, exceeding even the worst levels after the 2001 recession, according to data compiled by Equifax and analyzed by Moody's Economy.com. But BOK Mortgage -- a division of Tulsa, Okla.-based BOK Financial, an $18 billion regional financial services firm -- is a bright spot in the gloom: Automating much of BOK's communications processes around early-stage delinquencies has led to a double-digit percentage drop in the firm's mortgage-delinquency rate. Toward the end of each calendar month, BOK Mortgage used to rely on an autodialer to place outbound calls to potential 30-day contacts -- customers failing to make their monthly payments within the first few weeks of the month. Once the autodialer made a connection, the call was transferred to the next available loan counselor. "It was time-consuming for the loan counselor because they were basically tied to the autodialer for the last two weeks of the month," says Kenda Ewing, vice president of default at BOK Mortgage. A banking manager in BOK's retail-banking division told Ewing that the unit was using overdraft-notification functionality from Seattle-based Varolii, an on-demand communications provider. BOK Mortgage, however, decided to tap Varolii's early-stage collections application, going live in January 2007 to reach delinquent customers before late fees spiraled out of control. BOK Mortgage now uses the Varolii application from around the 17th day of each month through the end of the month to contact customers who have not made that month's payment. After receiving a Varolii-powered automated message, customers can connect into BOK Mortgage's system to make a payment by phone, or pledge to pay by the month's end (which takes them out of the collection-call lineup so that they are not pinged again that month). "BOK and other financial institutions have observed anecdotally that many customers prefer to be contacted by an appropriately designed automated calling program, as it removes the human element from a stressful situation," says Dan Zasloff, senior market manager of financial services at Varolii. If the call takes place during business hours, customers have the option of speaking directly with a loan counselor. Customers returning calls outside of business hours cannot speak with live counselors, but can still make a payment or a promise to pay. "They're not tied to our customer service hours," Ewing says. If the Varolii application connects to an answering machine, however, it leaves an 800 number and a PIN number that helps with verification when the customer returns the call. Since the deployment, BOK has realized a 325 percent increase in customer interaction rates. Even more impressive, its mortgage-delinquency rate has decreased by 12 percent. The division can interact with early-stage default customers before they become dangerously delinquent, and spend more time with customers whose accounts have already trickled into the later phases of default. "It frees up the loan counselors so that the last two weeks of the month they're able to contact other mortgagors that are more delinquent, [customers who] might need our assistance in getting their loans current," Ewing says. THE PAYOFF Since deploying Varolii's early-stage collections functionality, BOK Mortgage has:

• seen its mortgage-delinquency rate plummet by 12 percent;
• experienced a 325 percent increase in customer interaction rates; and
• freed up its loan counselors' time, enabling them to help customers in later stages of delinquency.

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