As a former banker, and head of large transaction processing teams for a top 10 US bank, nothing triggers memories of frustration with legacy systems like the mention of payoff quotes. Whether you're a customer waiting for days to obtain one or a loan servicer trying to process hundreds of backlogged requests, most will agree that this singular request, while sounding simple and quick, is anything but when done manually.

The reasons for payoff quotes vary from mundane inquiries to time sensitive gating requirements for lending transactions, real estate closings and sale of collateral. Delays in obtaining payoff quotes can amplify frustrations for borrowers and new buyers, as well as financing partners. Back office employees feel equal pain in trying to keep up with the onslaught of requests every single day.

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Many hands don’t always make light work

A typical payoff quote requires multiple touches by various back office employees and can take more than 15 minutes to produce from the time the request is reviewed to when it is manually created. It can also take several days for the request to move through the back office workflow before that review occurs. This process usually involves direct calls into a customer service line, monitoring of various email boxes and system workflows with manual calculations typed directly into form templates. These documents are then mailed or faxed via physical or digital machine to the requestor, which ranges from borrowers to third parties, to other internal employees. This process requires large back office teams to manage internal Service Level Agreement (SLA) targets that do not align with the expectation of real time delivery, and comes with a high risk of human error in both the manual nature of the quote template itself and the need to collate information from multiple sources and systems.

It’s not only frustrating for the back office but for the borrower too. In order to sell a vehicle or a home that a borrower owes money on, they need to request a loan payoff amount from their lender. They can’t simply check their previous statement’s balance, because the statement only says how much they owe on the date it was issued. They need to know how much they owe in real time factoring in the proper interest charges, and a payoff quote tells them this. Listed in the loan payoff quote is the accruing additional interest, amount owed from the last statement, and any fees or early payoff penalties, if applicable.

Many borrowers, however, don’t realize this. They believe the balance they see on their statements or in their payment portal is what they owe and are often surprised when they go to refinance their home or sell their cars and are told that the amount they actually owe is significantly more. And, what’s more, they’ll need to wait a few days before they receive notice of the final payoff amount.

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10-day payoff quote in under 10 seconds

Imagine if your financial institution could offer an automated payoff feature in your customer loan portal, and cut the aforementioned, manual process down from days to seconds, and keep it out of the back office. It would use API connections to retrieve information from the core and supplement the data with rules-based decision engines and stored tables that when combined, eliminates the manual edits typically required to produce an accurate payoff quote.

For example, mortgage payoffs may be automated for principal and interest balances but require a person to add a reconveyance fee and per diem adjustment. A modern loan servicing platform that offers automated payoff quotes, however, can replicate the actions of manual processors at scale, with minimal risk of errors by identifying the product type, payoff rules and data gaps from the core and other supporting systems.

Given the increased CFPB oversight, loan servicers are putting themselves at great risk by continuing manual processes that expose customer impacting delays and erroneous payoff information.

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Payoff requests don’t have to mean goodbye

Some financial institutions have expressed fear or hesitation in automating payoffs - worried that customers may exit their banking relationships at a faster pace if such requests are fully automated. Here again, modern platforms can determine why a customer is requesting a payoff quote and provide new financing options, for example, if the reason is for a refinance or selling the vehicle.

Specifically, a customer simply inquiring about a payoff quote may be less urgent than one that indicates their intent to refinance with another institution. By knowing the reason, you can hyper-personalize your strategy and customer experience for retention and growth. A payoff request can prompt a product offering message, such as “We’ve calculated your payoff quote. Before you go, would you like to see if you qualify for a lower rate with us?”  It’s even more powerful if your solution can execute a self-service, automated refinancing.

Whatever the reason for the payoff request, financial institutions could benefit from offering a simple, fast and frictionless way to request a payoff quote. It is one more way to engage with borrowers and demonstrate the values of transparency, education and automation. And more importantly, it can take a 7-10 day wait down to 7-10 seconds - ultimately delighting your borrower, and relieving your back office of a time-consuming and error-prone legacy process.

To learn more about self-service, automated payoff quotes, you can contact me at lwescott@constant.ai

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About the author

Lindsay Wescott serves as Head of Enterprise Integrations at Constant, where she leverages her extensive expertise in data governance and operational compliance to bring new features to market. She oversees policies and procedures for proper vendor oversight, monitoring and testing of integrated partners, ensuring compliance and remediation of exceptions for transmission and use of data.

Prior to her role at Constant, she served as Head of Transaction Processing at a top 10 US Bank and was responsible for leading consumer and commercial loan servicing divisions through transformational change, including process automation, system conversion and system simplification workstreams, economic relief program development, audit remediation, and regulatory compliance mandates.

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About Constant

Constant, a CUNA Strategic Services alliance partner, is the only software provider that fully automates loan servicing so members can resolve issues entirely in their online banking account - and then leverages insights from those actions to make relevant product offers to the member. With Constant, credit unions can reduce operating costs, empower members to self-serve, and leverage member self-service actions to deliver tailored product offerings.