Ben Giumarra

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.

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 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.”

I realize most institutions don’t currently (officially) allow this. 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 emails 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 and 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.

So I searched high and low for any regulatory compliance roadblocks to allowing people to text 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, “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.

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 or 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.

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 email system they use without the need to add any additional software or system. Did you know you could send text messages through email? 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 email by emailing 5189285910@vtext.com, thus saving the text message in the same way as any email would be saved.

Text only during the transaction: 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.

Keep a 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 add a note about a phone call or even email from a borrower. Not repeating word-for-word, but providing enough information to create a paper trail.

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.

Policy and 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.

Ben Giumarra is a risk management consultant with Spillane Consulting. He may be reached at BenGiumarra@SCAPartnering.com or (781) 356-2772.