Automation is quickly becoming a key motivator for lenders to modernize their current processes. Whether it’s to improve communication or to streamline back-end operations, lenders have more tools and technology solutions to choose from than ever before to enhance the borrower experience. This case study highlights how Umpqua Bank selected CoreLogic’s Property Tax Estimator, as its new technology solution, transforming their manual processes and providing a transparent and consistent system that reimagined their relationship with borrowers.
The Pain Points
Historically, the method to estimate property tax for borrowers has been disjointed and inconsistent. Loan officer calculations can vary widely from person to person, with some seasoned loan officers calculating taxes off 2% of the appraised value while others choose to base their estimate off 1.5% of the purchase price. Then, there’s the loan officer that chooses to do 2% of the fair market value. There simply is no industry standard on how to estimate the property tax for new construction or a new home, creating a significant amount of discrepancies in the industry.
For Umpqua Bank, an Oregon-based bank that has locations across five states, the outdated process seemed to over- or under-calculate in the industry at least 60% of the time. They’ve witnessed anything from an $8,000 shortage to a $4,000 overage, which is largely due to the manual work involved and how greatly calculations are impacted by each county.
“We want to be able to provide concise and accurate calculations for borrowers across the board regardless of the loan type, purchase price or any other sort of information. We want the same calculation, the same number, and the same process from beginning to end,” said Jacqulyne Trukositz, business application analyst at Umpqua Bank.
The unique part of property taxes and the factor that makes it so important to an overall successful borrower experience is that it drastically impacts the origination and servicing side of the mortgage process. Once a borrower comes over to the servicing side of the process, they’re expecting their monthly mortgage payment and property taxes to go in a certain direction, and if they don’t, the servicing team is left to explain where the break down in numbers happened. It’s a common problem in servicing departments and a problem that hijacks a lot of time. But for Umpqua Bank, this industry status quo wasn’t okay and didn’t deliver the higher-quality borrower experience that they strive for. To the bank, an escrow analysis should go so smoothly that it never impacts a borrower.
More accurate property tax estimates provide a huge opportunity for loan officers to be a trusted resource for borrowers. With property taxes being one of the most confusing and frustrating parts of having a mortgage for borrowers, Umpqua Bank wanted a solution that would make them a consistent resource for estimating property tax that can be relied on years into the future.
Top Requirements in a Solution
Since the industry has lacked a uniform way to estimate property taxes, Umpqua Bank wanted a solution that would not only alleviate related challenges but help them build strong relationships with borrowers. A comprehensive solution would:
- First and foremost, build a better borrower experience
- Establish consistency for property tax estimations
- Assist after natural disasters
- Benefit origination and servicing
Build a better borrower experience.
An automated property tax estimator should create a better customer experience. The loan officer might have the borrower for 30 days, but the company, or servicer, has them for 30 years. If a borrower’s monthly payment skyrocketed because of a faulty property tax calculation, that is what they’ll remember about their lender, and the feedback they’ll share with their peers. Anything to mitigate this upsetting conversation creates a better customer service experience overall.
“The biggest driver for us when it came to searching for a new solution was how it would improve the entire borrower experience. We wanted to create a consistent process from start to finish and a process that borrowers can have confidence in,” said Trukositz.
Establish consistency for property tax estimations.
There is no standard right now, and lenders desperately need a consistent process from beginning to end when establishing escrow accounts, especially when it comes to taxes. Every situation and borrower need to be treated the exact same way. There should be no guesswork and no manual work.
Assist after natural disasters.
With the loss of a home and probably so much more, lenders need to have the right tools in place to step up and help borrowers when they need it most. Unfortunately, natural disasters keep impacting a lot of people, and as they are forced to rebuild, they are also having to establish escrow accounts with their new homes. The right solution should put the control back in the borrower’s hands to decide what home they want and can afford to build given the predicted property tax.
Benefit origination and servicing.
The solution shouldn’t be a product that is used in the front lines and forgotten about. It needs to be used across the organization, keeping everything streamlined and consistent. From the beginning of the process all the way to a borrower deciding they want to reopen their escrow account after six years, the same numbers and documents should be used and available without fail.
Evaluation to Implementation – Selecting Property Tax Estimator
Property taxes have long been a known pain point, but most lenders have felt stuck with no viable solution in existence.
“In our search to improve the overall borrower experience, we were excited to learn that Property Tax Estimator could help optimize the results of those efforts,” said Trukositz.
While Umpqua Bank knew early on that it wanted to use the Property Tax Estimator, key conversations with the company’s decision makers still needed to happen. Trukositz explained that as other lenders start to have these conversations with their management team, many organizations will hyperfocus on the cost of the solution. Cost is important, but there are also other factors that have a substantial impact on costs that aren’t as easy to factor in.
Umpqua Bank looked beyond the main cost and factored in the opportunity they had to build greater trust with borrowers in an area that is infamously known for being difficult in the space.
“We checked the data points on what we could do to strengthen this process, and at the end of the day, it is a cost. But we felt like we were able to significantly grow the borrower relationship, which helps us become a reliable source for them, along with creating positive feedback that they could share with friends and families,” said Trukositz.
Umpqua Bank started the conversation with CoreLogic in late 2018 and set a go-live date for second quarter 2019. After scheduling an initial demo to see the product and its capabilities, the bank had a couple users test the product to see how well it would integrate into their daily work. They were able to use this time to take a deeper dive into the product and understand its functionality. Once they were comfortable with how the solution would be integrated into their system, they went live with it, seamlessly adding it to their resources with no disruption to borrowers.
Proven Results
Before Property Tax Estimator, the bank’s servicing team faced the same challenges as other servicers working to improve the borrower experience. With access to greater tax data accuracy and faster calculations through Property Tax Estimator, the bank’s servicing team could refine their process to help enhance the borrower experience.
“Since we’ve made the change, it’s been very quiet. Keeping borrowers informed with accurate tax information from the beginning of the process helps ensure fewer inquiries later. That improvement allows us to work on other things that keep us growing and require our attention more in depth. No news is good news.”
Beyond improved borrower experiences, the solution is also beneficial for auditing and compliance. If everyone is operating the same way, it creates a reliable and uniform record that regulators and auditors want to see.
Automation delivers a proven track record for every property tax estimation and eliminates the risk that comes from manual errors. If companies can save time on one step, then they can put much-needed time back into something that is more valuable to the company’s bottom line.
Conclusion
The Property Tax Estimator empowers borrowers to feel in control of what is infamously thought to be out of their hands. Lenders are able to partner with borrowers and build relationships founded on trust and consistency. When all parties know what to expect with the escrow account and property taxes, it mitigates one of the biggest deterrents to a positive borrower experience. From a loss mitigation standpoint to proactively making homebuilding decisions on the future property tax estimation, the streamlined and automated solution solves a major challenge that many lenders face.
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