A recent study by an international consulting firm revealed that customer satisfaction in mortgage lending ranked relatively low among financial services -- with mortgage brokers ranking especially low.
CFI Group recently released Consumer Satisfaction with the Mortgage Lending Process. The study indicates mortgage lenders will need to do the best possible job in satisfying their customers to compete effectively as interest rates rise and the market shows signs of contraction, the group said.
U.S. homeowners gave the mortgage lending process a satisfaction score of 69 on a scale of 0-100, according to the CFI study. The result is five points lower than the consumer financial services average score of 74 as measured by the American Customer Satisfaction Index -- or ASCI, a broad index of consumer satisfaction with the U.S. economy. Mortgage banking trails all other financial services measured in the ASCI except health insurance, which also scored 69. The leading financial services sector was reportedly life insurance with a score of 79, while retail banking scored a 74.
The low score was partly due to survey respondents' broad agreement that the process of obtaining a first mortgage or refinancing of a home was "too complex," said CFI.
The poor showing by mortgage lenders in the CFI study follows a report last summer from the Office of the Comptroller of the Currency that suggested mortgage loan complaints were on the rise. The Comptroller, which charters, regulates, and supervises national banks, reported that as a percentage of total loan complaints, mortgages went from 11% in 2000 to 23% for the first quarter of 2003.
"Our analysis suggests consumers may be very receptive to the idea of a 'Guaranteed Mortgage Package' which is a central component of Housing and Urban Development's proposed reforms to RESPA (Real Estate Settlement and Procedures Act)," said CFI senior consultant Rodger Park, in the announcement.
With the mortgage package, lenders would guarantee exactly what borrowers would pay to obtain their mortgage at the time of application, including all settlement costs such as appraisal, certifications and title insurance, according to CFI. Although current federal rules make it difficult for lenders to offer "packaged" loans, the one-stop-shop idea could help boost customer satisfaction.
"But even if the proposed reforms are enacted, the success or failure of individual lenders in satisfying their customers will be determined by key factors both specific to their organization and well within their control," Parks said.
The three most influential factors on customer satisfaction were the overall time it takes to a process a mortgage; the convenience of processing and closing the loan; and the role of the lender's loan officer or representative, the study said. The last factor could be aided by assigning a specific representative to prospective borrowers -- homeowners who were not assigned one gave their lenders significantly lower scores on "Satisfaction, Image, and their views of the Lender organization as a whole."
"Better performance on these factors will mean higher levels of customer satisfaction, which in turn mean higher origination volumes and the potential for pricing power," added Parks.
The study also found that borrowers who used a mortgage broker gave "dramatically" lower scores in all areas of the lending process, which CFI warned "poses a serious challenge both to the broker community and to those lenders who use brokers as a product delivery channel."
CFI said it surveyed a total of 378 people of which 34% purchased homes and 66% refinanced in the first half of 2003. The proportions of borrowers were representative of the balance in origination volumes between refinancings and purchases in the whole year. Respondents were interviewed by phone in the last two weeks of July.
E*TRADE and Bank of America recently ranked high among online lenders in a study by Change Sciences and rankings by Gomez.com.