J.D. Power: Mortgage Origination Satisfaction High Despite ‘Buyer’s Remorse’

J.D. Power, Costa Mesa, Calif., released its annual Primary Mortgage Origination Survey, finding that while overall satisfaction scores continued to increase year over year, a high percentage of home buyers are “remorseful” about their mortgage lender selection,

The study (http://www.jdpower.com/resource/us-primary-mortgage-origination-satisfaction-study) reported 21% of customers purchasing a home express regret over their choice of lender, with 27% of first-time home buyers regret their choice. The report said among customers who regret their decision, two distinct situations emerged:

–Customers having a poor experience (overall scores below 600 on a 1,000-point scale), which includes an above-average incidence of problems, lack of communication and unmet promises. “While this group’s responses aren’t unexpected, they are often vocal about their displeasure, making an average of 9.0 negative comments, compared with the study average of 0.7,” said Craig Martin, director of the mortgage practice with J.D. Power.

–The second situation is more unexpected, Martin said, because satisfaction among these customers is high. This group tends to be very price-focused and frequently obtains multiple quotes. Among customers who regret their lender selection, 72% indicate they were pressured to choose a particular mortgage product. Their final lender choice is often linked to financial reasons, such as getting a lower rate because they have a relationship with the firm (e.g., checking account with direct deposit).

“This ‘happy buyer’s remorse’ is in part due to customers feeling that circumstances out of their control drove them to a particular choice and that options weren’t totally clear,” Martin said. “Like a lot of consumers, they are happy with a good deal, but they can feel that they have to jump through hoops to get the deal. In the end, they may not fully understand exactly what they got, and the longer-term risk for lenders is that customers’ perceptions of the deal may change in the future.”

Martin noted one potential contributing factor to this condition could be TRID (TILA RESPA Integrated Disclosure rule, also known as “Know Before You Owe”). “Over the past two years, much of lenders’ attention has been focused on complying with and minimizing the negative effects of these new requirements, which became effective in October 2015,” he said. “Lenders have feared that the new requirements would extend an already lengthy process and negatively affect satisfaction.”

The report noted while various sources have reported increases in the total number of days for the lending process, this year’s findings show little change in the perceived speed of the process. Martin said improved communication and setting expectations appropriately have helped prevent negative perceptions.

“Whether it is a new regulation, shifting rates or new technology, lenders will continue to face challenges that require them to change,” Martin said. “Regardless of what comes, if lenders focus on the needs of the customer and execute on key best practices they can positively influence perceptions and minimize the negative effects on customers.”

Other key findings in this year’s study:

–A higher percentage of customers in 2016 indicate their loan representative always called back when promised, compared with last year (85% vs. 81%, respectively), and their loan closed on the desired date (81% vs. 79%).

–Satisfaction is significantly higher among customers buying a home (840) than among those refinancing (821). In the 2014 and 2015 studies, the levels of satisfaction in these groups were nearly identical.

–Technology is becoming increasingly important, with 28% of customers indicating they completed their detailed application online, up from 22% in 2015 and 18% in 2014.

Study Rankings
–Quicken Loans ranks highest in primary mortgage origination satisfaction for a seventh consecutive year, with a score of 869. Quicken Loans performed particularly well in the application/approval process; interaction; loan closing; loan offerings; and onboarding factors.

–CitiMortgage moved up three positions from fifth in 2015 to second this year, with a score of 851. Ditech Financial, new to the study in 2016, ranked third with a score of 849.

–Wells Fargo Home Mortgage (+52 points) and Nationstar Mortgage (+50 points) post the most significant year-over-year improvements in overall satisfaction.

The study measures customer satisfaction with the mortgage origination experience in six factors (listed alphabetically): application/approval process; interaction; loan closing; loan offerings; onboarding; and problem resolution. Satisfaction is calculated on a 1,000-point scale. The study is based on responses from 5,182 customers who originated a new mortgage or refinanced within the past 12 months and was fielded between July and August.