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Best Mortgage Lenders

J.D. Power study on mortgage process

December 14, 2006

By MortgageDaily.com staff

Final mortgage approvals that take longer than one week are likely to create an unhappy mortgage prospect, according to a new study which cited several sources of borrower dissatisfaction. The importance of interest rates, office location and the Internet was also analyzed.

Overall satisfaction with the mortgage borrowing process increased 7 percent from 2005 and was most impacted by improvements in the closing process, according to J.D. Power and Associates 2006 Primary Mortgage Origination Study released today.

The study, fielded recently between October and November, was based on responses from 4,115 borrowers who obtained a new mortgage in the previous nine months, J.D. Power reported.

The three primary factor areas that drive customer satisfaction with lenders are the application/approval process, loan officer/representative or mortgage broker, and closing.

"In a cooling housing market where we see decreases in purchase mortgage and refinance volumes, greater stability exists in the industry, allowing lenders to better focus on the needs of their customers and smooth out any wrinkles in their operations," said Rocky Clancy, J.D. executive director of banking and mortgage practice, in an announcement.

Despite improvements, the study found that 28 percent of borrowers experienced some problem during the mortgage origination process, including errors in closing documents, miscommunication of loan terms and unavailable or unresponsive loan consultants or brokers, the marketing information firm said. On average, two out of five borrowers with problems indicate their loans closed late due to problems -- a major impact on overall satisfaction scores.

"One of the biggest drivers of dissatisfaction in mortgage origination is not keeping commitments," Clancy added. "Top-performing lenders differentiate themselves first and foremost by framing expectations and executing well within the boundaries they establish. The bottom line for many customers in terms of how well their lender satisfies them is whether the loan closes on schedule and includes accurate closing costs, payments and payoffs."

The study revealed that customers from the five highest-ranking lenders make 20 percent more recommendations than other lenders' borrowers and are also significantly more likely to use their existing provider for purchase-money mortgages, refinances and home equity loans, according to the announcement.

The speed at which lenders give borrowers final approval on their loans is a critical influence on overall satisfaction. While two-thirds of customers said they received final approval less than one week after completing an application, satisfaction dropped nearly 100 points, on a 1,000 point scale, among those who waited seven or more days, J.D. reported.

Asking borrowers to provide additional information and documentation after they submit an application reportedly significantly decreases satisfaction as well. In the study, 56 percent of respondents complained that they were asked to produce additional information more than once -- further impairing satisfaction.

The driving reason for selecting a lender revolves around decisions regarding interest rates, fees, and closing costs, as 28 percent of respondents indicated this, and 17 percent said a previous or existing relationship with the lender was a strong motivator, the firm reported. Nearly 70 percent of those refinancing choose their current lender and these borrowers record satisfaction scores 35 points higher than those who choose a new lender.

While customer satisfaction is highest when dealing with lenders in person, the research showed borrowers managing the process online were more satisfied than those who interacted with a person over the phone. Furthermore, the Internet played a role in two out of five borrowers using a lender's site or online third-party service to gather information on mortgages, according to the announcement.

"Contrary to other financial services sectors where smaller firms tend to perform better and relationships are key drivers of satisfaction, the highest-ranking mortgage lenders are large-scale players. Accordingly, process carries greater weight in determining overall satisfaction."

SunTrust Mortgage topped all other lenders in customer satisfaction, with a score of 782 out of 1,000 points, through performing particularly well in the three factor areas that drive satisfaction. SunTrust's score was well above the industry average of 750, according to the announcement.

Strong ratings in the application/approval process and closing put Bank of America in second with a score of 781. Wachovia placed third with a 774, followed by Wells Fargo's 766 and Chase's 762, J.D. reported.

Countrywide was in sixth, followed by GMAC Mortgage, Washington Mutual, ABN AMRO -- last year's top ranked-lender which is rumored to be on the block, and National City Mortgage.

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