High inflation and interest rate hikes mean it’s only a matter of time before financial institutions can expect to see an influx of loan modification and deferment requests. As months of financial pressure will accumulate, it’s inevitable that more Americans will seek relief. If that’s the case, banks
, credit unions
, and auto lenders
will want to do everything in their power to ensure speedy, seamless loan modification requests.
The Peril of Cumbersome Loan Modification Processes
Financial institutions need to gear up for a potential flood of loan modification requests. Clumsy and manual processes, physical paperwork, and slow turnaround times threaten to make loan modification requests a heavy burden.
Bug-ridden web portals, PDF forms that need to be printed and brought to a branch, frustrating IVRs that bounce customers from agent to agent — all of these can undermine the seamless processing of loan modification requests.
Furthermore, different parts of the loan modification often don’t communicate well, resulting in silos. For example, a customer may request a loan deferment if they are falling back on their payments. Yet if this change isn’t properly documented, someone from the collections department who is unaware of the modification request may take steps to repossess their vehicle. Such missteps due to siloed communication and broken workflows carry a heavy price. They can be discovered during audits and through customer complaints to the Consumer Financial Protection Bureau (CFPB)
Customers dealing with complicated or stressful loan modification processes are prone to repeat calls, straining contact centers and increasing overhead costs. Even once the loan modification request is received and the terms are modified, the customer experience has already been tarnished. This can put customer loyalty at risk.
Some of these issues can be chalked up to organizational mismanagement. But often, streamlining the customer-facing part of the loan modification process can lead to significant improvements. One of the key elements of the process is the loan modification form itself.
A Better Loan Modification Form
On the face of it, a loan modification form is a simple thing. In practice, there can be issues that come with it. Sometimes, the form is downloadable from the internet, but needs to be delivered in person. Other times, the form can be submitted online, but it cannot be easily completed from a customer’s mobile phone, or requires special software (such as a PDF editor). All of these scenarios create friction, increasing the probability of customers failing to submit their requests in a timely manner. In the meantime, they are considered delinquent.
An ideal loan modification form can be filled out from the customer’s preferred channel (whether it’s mobile phone or desktop) without any need to download software.
When financial institutions consider the ideal form type for loan modifications, they should look for the following. Next-generation eForms
such as Lightico’s will have all of these characteristics:
- Smart Fields: Transform the fields in existing paper and PDF forms into smart fields. These smart fields are delivered to the customer via an easy-to-fill mobile eForm which can be completed in seconds with auto-fill functions.
- Agent-Guided Completion: In-call form completion ensures that customers get the agent guidance they need to complete forms.
- Mobile Optimized: Customers can share information with the company straight from their mobile device, wherever they are.
- Easy to Complete: Conditional logic ensures a smooth user experience as forms are easier to understand and fill, showing only relevant fields.
- No Longer Than Required: Smart eForms hide fields that were completed elsewhere or are not relevant for the workflow.
- Personalized Experience: Conditional logic displays tailored fields, messages, and formats to make the customer experience personal.
- Omnichannel Self-Serve: eForms can also be integrated within all customer touchpoints. eForms can be harnessed for call centers, websites, IVRs, Alexa, or an in-store POS device so customers can complete and sign forms instantly & independently.
- Integrated With Your Existing Systems: Lightico’s eForm solution can be easily integrated into your existing workflows, CRM, agent toolbars and third-party business applications, so information can be pre-populated in the form fields and centrally stored with a complete audit trail.
An Automated Workflow for Loan Modifications
It’s important to remember that a loan modification form doesn’t exist in a vacuum. It also requires terms and conditions
consent and/or a signature — these should also be fully digitized. There is no need for a verbal agent scripts; terms can be digitized.
Furthermore, these loan modification forms, eSignatures, and T&Cs (and if needed, supporting document requests) can be built into a seamless automated workflow
: Lenders’ systems fail to quickly collect loan modifications, resulting in lags and confusion. Collections departments aren’t looped into the loan modifications and may start pursuing a repossession. Silos, confusion, and frustration are common.
: Delinquencies or nonpayments are quickly turned into modified loan terms, which are documented and instantly updated in the system for all departments to see.
Digital workflows are designed to maximize compliance and minimize siloes. A typical loan modification process using automated workflows can look like this:
- The representative calls the delinquent customer and informs them of their nonpayment status.
- The representative and customer decide on a repayment plan.
- Based on the customer’s state of residency, the representative sends out the loan modification form, and requests for any documentation and associated legal clauses.
- Based on the information received, the representative either sends modified terms that require a signature or escalate the case to a secondary business center and compliance.
Here are some examples of conditional logic
triggers auto lenders may want to employ for loan modifications:
[From California y/n, add waiver x to signature]
If: Loan is delinquent
If: State or residency is x
Then: Request y documents for loan modification
Then: Request signature
Then: Integrate into back office
Then: forward to compliance office
Digitized Loan Modification Forms Are Essential
To prepare for a wave of delinquencies and loan modification requests, lenders must go all-in on digital if they haven’t already. By employing HTML-based, intuitive eForms, document collection
, and T&C consent, lenders can create a more streamlined and humane loan modification experience for their customers.