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Banks Miss Boat on Originations

Survey suggests consumers willing to pay more to deal with primary bank

Oct. 22, 2012

By Mortgage Daily staff

A new survey suggests that some financial institutions are missing out on a substantial share of home-loan originations from existing clients even though those very same loan prospects want to do business with them. An even bigger finding was that prospective borrowers are willing to pay more to deal with their primary bank -- especially if they are treated better or find it easier to complete the origination process.

Among consumers, 70 percent would prefer to have their mortgage with the bank that they do a majority of their business with.

But only 39 percent actually closed their home loans with their primary banks.

That is according to a survey of 618 consumers announced Monday by Carlisle & Gallagher Consulting Group, a management and technology consulting firm that caters to the financial services industry. The survey was conducted last month.

The disparity indicates that such banks could increase their residential originations by 79 percent.

Carlisle & Gallagher explained that while cost was considered one of the five most important factors in the mortgage process by 84 percent of the respondents, other factors are also important.

Two other important factors are trust in the financial institution and the quality of customer service. But more than a quarter of the surveyed group are frustrated because of "untrustworthy advice," while nearly a third said they are irritated with their lender's difficult communication.

More importantly for the banks -- cost, trust and customer service are potentially the most profitable factors.

More than a third of the surveyed consumers would be willing to pay more for a mortgage if the lender provides superior customer service, and more than half of that group would pay more if the mortgage process was easier to complete. Yet nearly a third of the consumers expressed frustration over the inability to track the status of their mortgage applications.

"And, 39 percent of Pay More respondents are willing to pay more to use their primary bank," the report stated.

Another interesting finding was that fewer than a quarter of consumers see any benefit from regulatory changes.

Almost half of the respondents expect significant appreciation in the home values over time, while just 4 percent expect a decline. One-in-five consumers expect to buy a home during the next three years.

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