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Best Builder Lenders

J.D. Power releases inaugural study

September 12, 2007

By MortgageDaily.com staff


A new report indicates borrowers buying new homes prefer to use their builder's mortgage company. The report ranked the mortgage subsidiary of a Texas-based builder as the best in its class.

Those were the findings of J.D. Power and Associates' inaugural New-Home Builder Mortgage Originator Study announced today. The study, in which 50,399 buyers in the 34 largest home building markets were surveyed, measured the borrowing experience.

Among builder-owned lenders, Centex Homes subsidiary CTX Mortgage ranked highest in 12 of 17 markets -- more than any other competitor, according to the report. Centex itself received J.D. Power's Platinum Award for Excellence and ranked highest in overall customer satisfaction in 14 U.S. markets.

"In times like these, as builders attempt to attract customers and close sales in the midst of tightening credit and weakening demand, differentiation through customer satisfaction, new-home quality, design and mortgage origination become especially important," J.D. Power executive Paula Sonkin said in the statement.

The most important factor in choosing to use a builder's mortgage company was the loan originator, according to the report. Loan officers accounted for 40 percent of a borrower's satisfaction with builder mortgage origination.

The closing was cited as the second most important fact, accounting for 33 percent of the buyer's satisfaction, followed by the application and approval process -- which accounted for 27 percent of borrower satisfaction.

"The vast majority of new-home buyers take advantage of mortgage origination services when offered by their home builder due to competitive rates, and easier and more seamless processes," J.D. Power said. "Home builders have traditionally offered price reductions or lower interest rates to new-home buyers as sales incentives."

One builder practice, penalizing borrowers who don't use the in house originator, was recently challenged in a lawsuit.

The Ryland Group was sued by a group of borrowers who say the California-based homebuilder violated federal law by coercing them with cash incentives into obtaining mortgage loans from Ryland's mortgage subsidiary.

In the class action complaint filed in the U.S. District Court for the Northern District of Georgia, the plaintiff and her attorneys claim that Ryland requires home buyers to finance their home purchase through Ryland Mortgage under the threat of having to pay more money for their new home -- a violation, they claim, of the Real Estate Settlement Procedures Act.

Ryland has denied the accusations.

The National Mortgage Complaint Center previously announced that "millions of new home purchasers have been overcharged after they felt like they...were forced into using the mortgage product of a regional or national home builder."

By offering "incentives," such as "bonus" construction features or a portion of the closing costs to be paid, the builder "lures the unsuspecting new homeowner into a trap" -- where the borrower ends up with an interest rate much higher than their credit deserved or gets stuck with junk mortgage fees that "even the most crooked mortgage lender would think twice about ever charging," the center said at the time.


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