The End of the Moratorium on Mortgage Foreclosures and How It Affects Your Financial Institution

When the COVID-19 pandemic began, we had no idea of the effect it would have on the financial services industry. But we all knew one thing for sure: with so many people losing their jobs or having to endure a reduction in their hours, mortgage payments were going to fall behind on a massive scale. The government stepped up with the Coronavirus Aid, Relief, and Economic Security (CARES) Act, putting a moratorium on foreclosures for federally funded mortgages until June 30, 2021.

What this means for financial institutions is there will be an influx of forbearance cases maturing in the fall of 2021. Unless the moratorium is extended once again, and there have been steps taken in that direction, an unprecedented 1.7 million cases will exit forbearance programs in the fall. Financial institutions will need to be ready to hit the ground running by September 2021 with properly trained personnel, resources and guidance in place.

In addition, the new administration has committed to increased scrutiny over Fair Lending and Fair Servicing practices. According to a Consumer Financial Protection Bureau (CFPB) bulletin, the CFPB will “closely monitor how servicers engage with borrowers, respond to borrower requests and process applications for loss mitigation.” The CFPB has strongly encouraged financial institutions to be proactive, work with borrowers, address language access issues, fairly evaluate income, promptly handle inquiries and, above all, prevent avoidable foreclosures. “Our first priority is ensuring struggling families get the assistance they need,” stated CFPB Acting Director, Dave Uejio. “Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families.”

Over the past year, banks and credit unions of all sizes have developed new programs and practices to deal with the influx of forbearance cases. For some, the large number of cases, drain on resources and adaptation to a digital environment may have caused difficulty keeping up with standard compliance practices. A vital step in that direction is developing a standardized relief assessment program with well-defined, consistent eligibility requirements. With a standardized program, servicers across the enterprise will have the guidance they need to service those exiting forbearance and meet Fair Servicing criteria. Of course, there will always be cases that will deviate from standards. In those cases, the exceptions and reasoning behind them should be fully documented.

To further mitigate risk, conduct a review and analysis of your Fair Lending and Fair Servicing protocols and practices, even if a review is not scheduled at this time. This will allow you to identify any potential risk factors, address them early and tell your story with confidence. However, conducting a comprehensive review can cause undue stress and pressure on already overworked resources. Marquis can help.

The Marquis Compliance Professional Services team, known for their expertise and personal service, are well-versed in all aspects of compliance, including Fair Lending and Fair Servicing. They can perform audits and assessments to ensure you have the necessary policies, processes and procedures in place and define areas that need attention. Our turnkey solution combines industry-leading CenTrax NEXT compliance software with the experience and intuitive skills of the Marquis Compliance Professional Services experts. This powerful combination of data and specialists will enable you to identify risk factors and address them before they become an issue.

As Uejio stated, “There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming.” Contact Marquis to learn more about our compliance solutions and how they can help you prepare your financial institution for the flood of maturing forbearance cases and the increased scrutiny that will follow.

What Works? An Analysis of Campaign Results and Best Practices – Part 2 Featuring Marquis’ CMO, Dr. Tony Rizzo

 

Video Transcription 

What Works? An Analysis of Campaign Results and Best Practices.

Part 2: Campaign Parameters 

Dr. Tony Rizzo, CMO, Marquis

One of the questions I get asked frequently is, “What works?” So, taking that question to heart, we executed a very extensive analysis of campaign performance throughout campaigns that we managed and produced over 2019. I’m going to share those results with you today.

We stratified the results also by assets. I was curious to know that the smaller you were, did you do worse than someone much larger? You can see the numbers. Not really. So consumers are consumers. Your asset size does not really play a factor in your ability to be successful with this approach.

We looked at the strategy as well. We stratified across three primary strategies: acquisition, cross sell and retention. And here’s how to think of these – red to green. Red, the farther away you are from the product or institution. Green, the closer you are to the product or institution.

So what does that mean? I’m going to do a checking promotion, a prospecting acquisition campaign. Or I’m going to do a checking retention campaign where I already have the checking account. But you’re going to sell me something like access, convenience services, perhaps a safe deposit box and add on a bolt so I’m closer to the product.

When I’m closer to the product, I already understand that you’ve already captured my attention. My psychological fence, if you will, has been opened versus the acquisition side of that where I may or may not know you. I don’t have this product. I have to think harder. So it’s kind of common sensical that you would think that acquisition all the way to retention, you’re going to have lower to higher response rates, lower to higher marginal ROI.

Next, we looked at the difference between a campaign and a matrix. What does that mean? Campaign – one-time event. Matrix – ongoing frequency – onboarding, reboarding, for example. Or perhaps it was an auto loan campaign that had multiple flights and multiple touch points. In every case, one-time versus multi-times, multi-times outperforms in spades versus the one-time wonder. And you can see that’s true amongst response rates, accounts open and average balances.

Now let’s take a look at channels by direct response and indirect response. Remember direct response, you promoted an auto loan, you bought an auto loan. And you can see we’ve stratified this across direct mail only, direct mail plus email, and then email only.

And here’s the thing that’s interesting. You look at these from a response rate, they’re all fine. There’s nothing wrong with them. They’re pretty good response rates. But look at the balances. If you look at the balances, they’re 126% better when you use those two channels. You’re going to see that throughout the rest of this presentation. The combination of channels substantially, I think, in every case but one, lifts balances.

Why do I care? I’ve never seen an annual report that says we had 7% response rate. I have seen annual reports that speak to marketing’s ability to bring in dollars. So I’m going to focus on dollars – balances per account that come in the door. The numbers hold up when I also look at direct plus indirect response. Same thing, while not as dramatic, same kind of premise will hold.

Let’s take a look at data use and package design.

When we talk about the use of data, we categorize data six different ways, in terms of how we weaponize that data to communicate with the consumer. Could be FICO based data. Could be based on the timing, that’s marketing automation, the timing of the offer. Could be based on variable use of content. In other words, I can go in and send you a letter that says your home, based on what sold within your neighborhood, is worth X. Is it time to buy a new home? Is it time to refi? That’s using content in a variable sense to drive a better connection with that consumer.

Could be branch based. Could be payment based. We do an extensive amount of work with payments, to be relevant, to be personal, and more importantly, to be specific to answer questions ahead of time that the consumer, the member, might have.

I would also use the life stage as a variable driver. We’ll show some examples of that as well. One of those you’re seeing here.

So our typical direct mail letter package looks very similar to what you’re seeing here. A lot of variable photography, variable copy. I’m going to have different offers going in based on what the data is telling me. I’m using a non-window envelope. And in a lot of cases we use a lot of live stamps. It reduces a lot of the clutter on the envelopes.

Again, I’m trying to be personal with you. This envelope that you’re looking at is more personal than one that, say, has a mailing indicia. So that’s our standard package. That’s when I talk about letters. This is really what I’m talking about.

As we go through this now, if I’m doing postcards, same kind of approach. They’re highly data based. They are all oversized. We do oversized cards so they stand out in a stack of mail. Your postcard rises to the top.

If I’m doing email, we do all manner shapes and sizes of email. They are all highly databased. But they’re also very what I call code simple, one column designs that are designed to easily render on 90% plus of the platforms that are out there. Keep your email simple. Don’t do a lot of columning. Don’t do a lot of special effects within the email. It ends up not working as well as something very simple and straight to the point.

Understanding CRA Reform

Understanding CRA Reform

An overview and comparison of the Federal Reserve’s CRA ANPR and the OCC’s final ruling

Since its enactment in 1977, the Community Reinvestment Act (CRA) has been an important tool in addressing redlining and the lack of investments in low- to middle-income (LMI) communities. It requires banks to meet the lending needs of their community, including credit-worthy LMI individuals and minority-owned businesses. However, it has failed to keep pace with today’s evolving banking environment or improve credit accessibility for those it was designed to protect.

It’s been more than 25 years since the last revisions to the CRA, and during that time mobile and digital banking has grown in popularity without being addressed in CRA requirements. In addition, the gap between black and white home ownership is 3% greater than it was in 1960.1 It’s clear that the CRA needs to be revisited and updated. This article will compare and contrast the OCC’s and the Fed’s efforts to strengthen and modernize existing CRA requirements.

The Office of the Comptroller of the Currency

The OCC released an Advanced Notice of Proposed Rulemaking in August 2018. The FDIC joined the OCC and released a joint Notice of Proposed Rulemaking in December 2019 and opened the floor to stakeholder comments to help inform and guide the final ruling. Citing the need to focus on issues related to the 2020 COVID-19 pandemic, the FDIC removed themselves from the rulemaking process. In May 2020, the OCC released their final ruling, which includes, but is not limited to:

  • Clearly enumerating CRA qualifying activities
  • Defining assessment areas
  • Establishing performance standards
  • Establishing data collection and retention requirements

While the final rule went into effect on October 1, 2020, banks subject to general, wholesale and limited performance standards have until January 1, 2023 to comply. Intermediate and small banks must comply with the ruling by January 1, 2024.

The Federal Reserve

In September 2020, the Fed released an ANPR on updating their CRA regulations with a 120-day comment period ending February 16, 2021. Stakeholders “have expressed strong support for the agencies to work together to modernize CRA.”2 Stakeholders were asked for feedback regarding the Fed’s efforts to:

  • Bring greater clarity, consistency, and transparency to performance evaluations
  • Minimize data collection and reporting burden
  • Base performance evaluations on bank size, business models and local conditions
  • Clarify and expand eligible CRA activities in LMI communities
  • Recognize the special circumstances of small banks in rural areas

Their intent is to ensure LMI banking needs are met, promote financial inclusion and address changes in the banking industry over the past 25 years.

How they differ.

Both reform efforts seek to align CRA requirements and reporting with today’s banking needs, from modernizing assessment areas to clarifying eligible activities for CRA credit. However, the approaches differ in a few areas.

While the OCC rule was finalized, the FED ANPR is still accepting comments. Pundits believe there is still time for the agencies to come together to provide uniform regulations, as stakeholders across the board have requested.

Be ready for your next CRA examination.

Understanding updated CRA requirements, from whichever regulatory body you report to, is essential to receive the CRA credit your bank has earned. At Marquis, we’ve kept and continue to keep our finger on the pulse of the CRA modernization process. When it becomes time to implement new CRA regulations, Marquis compliance experts will be ready. Marquis has a proven history of helping clients tell their CRA story.

“Our recent CRA Exam was truly a team effort, involving our Production Officers, CFO, Investment Officer, CRA Committee and some invaluable help from Marquis,” says Roger McLaren, Vice President, Inwood National Bank. “With CRA, like in life, you have to keep score, tell your story and pat yourself on the back. In the end, it comes down to solid record-keeping. Between our efforts, Marquis Software’s ability to sort and organize our data, and assistance from Marquis Compliance Professional Services, we were able to assemble the data we needed, analyze the results, and verify our success. It all culminated in an Outstanding CRA Exam rating.”

Contact us at [email protected] to see how Marquis is addressing this much-needed change to the CRA and how it affects your institution.

 

 

1 Urban Institute, Reducing the Racial Homeownership Gap https://www.urban.org/policy-centers/housing-finance-policy-center/projects/reducing-racial-homeownership-gap

2 Federal Reserve, Fact Sheet on the Community Reinvestment Act, Advanced Notice of Proposed Rulemaking, September 2020 https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200921a1.pdf

CRM is the Relationship Lighthouse

While the way we transact has evolved, relationships are still at the core of banking.

Over 2,000 years ago, the Romans built lighthouses in Egypt to warn ships of dangers and to keep ships safe, allowing sailors to navigate treacherous waters and carry out their mission. Today’s banking lighthouse is the CRM platform.

If there is one takeaway from 2020, it’s the need to recognize relationship warning signals and opportunities that require personalized service. That’s hard to do without the ability to understand the customer relationship, respond to customer needs and support their financial goals on an enterprise-wide level.

Customer relationship management (CRM) captures conversations, monitors transaction activity, and displays actionable data so any staff member can connect with customers using relevant and personal communications. CRM utilizes customer data to build more engaged relationships through an integrated journey.

Financial institutions that incorporate CRM into their service develop stickier relationships with their customers. Banks leveraging CRM will experience an increase in sales. But this isn’t about dollars; it’s about an increase in connection. Better service leads to a stronger relationship.

“One of the key benchmarks for all financial institutions should not simply be to gain a deeper relationship with its customer base, but to position themselves as the ’go to‘ solution provider for all of the customers’ financial needs,” says Bill LaVigne, COO at The Bank of Elk River in Elk River, MN. “To accomplish this, you must present yourself at the right moment in time with the right solutions and the right advice, building trust and confidence. An effective CRM system provides the platform to deliver those opportunities. The rest is on you to execute.”

Most CRM systems don’t account for the nuances of the financial services industry. Generic CRMs leverage information on age, ethnicity, and gender without fear of compliance landmines. The situation is quite different for banks.

With the input of industry experts, Marquis created CallTrax NEXT, a CRM that uses terms tailored to the financial industry. This unique CRM integrates service, sales, and marketing automation with organized, actionable data. Marquis also helps to assess bank sales and service processes to customize a system that enhances both.

Given the rocky waters of 2020 and the unknown of 2021, you need to consider how to safely sail through the upcoming year. Let a CRM platform be your lighthouse and assist your customers in navigating their financial ship.

 

RYAN HOUSEFIELD is Senior Vice President of Sales at Marquis.