J.D. Power: Annual Satisfaction Study Reveals ‘Underlying Problems’ in Mortgage Industry

Record-low interest rates and low housing inventories have driven U.S. home sales to a 14-year high and yet another refinancing boom—the Mortgage Bankers Association now estimates 2020 mortgage originations to jump to $3.18 trillion—but it has also exposed underlying weaknesses in lender and servicer strategies, said J.D. Power, Troy, Mich.

“It’s been a complicated year for the mortgage industry,” said Jim Houston, managing director of consumer lending and automotive finance intelligence with J.D. Power. “Between surging customer volumes on the origination side, an influx of customer inquiries on the servicing side and a workforce that has been completely displaced by the pandemic, resources have been stretched to their limits. That strain is showing up in slower loan processing times, missed opportunities to communicate and unreliable self-service tools. While some of these shortcomings may have been opportunities in prior years, current market conditions and customer satisfaction metrics indicate that mortgage originators need to look hard at fixing them if they want to stay viable.”

The company’s 2020 U.S. Primary Mortgage Origination Satisfaction Study released this week said while the boom in volume has generally been positive for primary mortgage originators, it has also exposed underlying weaknesses in their digital strategies that could create challenges down the road. The study said mortgage originators’ shortcomings in the areas of self-service tools for application and approvals, frequent communication and long loan processing times could negatively affect customer satisfaction over time.

The study also reported, to no one’s surprise, that Rocket Mortgage by Quicken Loans, Detroit, ranked highest in mortgage origination satisfaction for the 11th consecutive year.

Key study findings:

Overall customer satisfaction buoyed by low rates: Overall customer satisfaction with primary mortgage originators rose by six points (on a 1,000-point scale) this year, driven largely by the competitiveness of interest rates offered. However, satisfaction in several critical client service attributes, such as loan processing time, ease of self-service interaction and helpfulness of customer service, fell from a year ago.

Average refinancing processing time increases: The average loan refinancing transaction in 2020 took 42 days from application to closing, up from 39 days in 2019. Accordingly, refinancing customer satisfaction with the timeliness of the application process and length of time from final loan approval to closing declined year over year.

Self-service channel usage falters in application/approval process: The number of customers using self-service channels for loan applications and approvals increased byfive percentage points this year, while the number of customers using personal service channels (in-person, phone and e-mail) declined by five percentage points. Despite the increase in use, however, satisfaction with the application and approval process among customers using self-service digital channels declined 10 points this year.

Satisfaction directly linked to frequency of communication: The more lenders communicate with customers during the application, closing and onboarding processes, the more customer satisfaction improves. Customers with the highest level of satisfaction (929) receive daily communications from their lender. However, this occurs just 11% of the time.

–Rocket Mortgage by Quicken Loans ranked highest in mortgage origination satisfaction for an 11th consecutive year, with a score of 883. Bank of America (860) and Chase (860) tied for second.