Key Takeaways:
– The old way of doing business is over and there are market challenges and opportunities to be prepared for.
– Mortgage lenders have had to pivot from refinancing to providing purchase loans, which means satisfying customers is about more than just offering the lowest rate.
– Consumers want lenders to help them navigate challenges and provide personalized service.
– The J.D. Power U.S. Mortgage Origination Satisfaction Study found that while some consumers choose lenders based solely on the lowest rate, the majority choose lenders for other reasons.
– Factors that contribute to overall customer satisfaction include communication, digital channels, trust, loan offerings, ease of doing business, and people.
– The top five lenders for overall customer satisfaction are Fairway Independent Mortgage Corp, Rocket Mortgage, Citi, Prosperity Home Mortgage, and Bank of America.
– United Wholesale Mortgage is the largest mortgage lender but was not ranked because it only funds loans originated by mortgage brokers.
– The value equation for mortgage originators has shifted to helpful advice and problem-solving rather than instant approvals and fast processing.
– Engaging with borrowers earlier in the house-hunting process increases the chances of retaining them.
– J.D. Power recommends lenders focus on addressing customers’ unique challenges and meeting their needs rather than just selling a product.
inman:
The verdict is in — the old way of doing business is over. Join us at Inman Connect New York Jan. 23-25, when together we’ll conquer today’s market challenges and prepare for tomorrow’s opportunities. Defy the market and bet big on your future.
Soaring rates that forced mortgage lenders to pivot from refinancing existing homeowners to providing purchase loans to homebuyers means satisfying customers is about more than just providing the lowest rate.
Consumers also want lenders to help them navigate challenges that can keep them from getting to the closing table, according to the latest J.D. Power U.S. Mortgage Origination Satisfaction Study, which surveyed 9,191 consumers who took out a purchase mortgage or refinanced during the year ending August 31, 2023.
The study, released Thursday, found that while 31 percent of consumers said they selected their lender solely because they offered the lowest rate, 69 percent chose lenders for other reasons — such as personalized service and help navigating the loan market.
(Although technology makes it easy for homebuyers to compare rates with different lenders before taking out a mortgage, Fannie Mae surveys show one in three don’t shop for a loan. The disparity in rates offered by lenders more than doubled last year, and research by Freddie Mac suggests homebuyers can potentially save $600 to $1,200 a year by applying for a mortgage with multiple lenders.)
Craig Martin
“Two years ago, the mortgage market was an ultra-low-rate goldmine in which lenders were making big profits and the primary challenge was keeping up with demand,” J.D. Power executive Craig Martin said, in a statement. “It’s the opposite today, with high rates and a lack of affordable homes leading to a limited number of eligible borrowers. To effectively compete in the future, lenders need to set themselves apart by focusing on addressing customers’ unique challenges and meeting their needs rather than selling a product.”
J.D. Power takes six performance factors into account when tallying overall mortgage lender customer satisfaction on a 1,000-point scale: communication, digital channels, level of trust, loan offering meets my needs, made it easy to do business with, and people.
The average overall customer satisfaction score among mortgage lenders evaluated was 730, up 14 points from a year ago. But the increase was driven primarily by repeat buyers, and overall satisfaction among first-time homebuyers was down “significantly.” That’s a reflection of “the complex lending environment and considerable challenges customers are facing,” J.D. Power said.
J.D. Power 2023 U.S. Mortgage Origination Satisfaction Study
Source: J.D. Power
For overall customer satisfaction, the top five lenders were Fairway Independent Mortgage Corp. (776), Rocket Mortgage (759), Citi (756), Prosperity Home Mortgage (748) and Bank of America (747).
Also scoring at or above the industry average of 730 were Movement Mortgage (745), Caliber Home Loans (737), CrossCountry Mortgage (737), Prime Lending (735), Chase (733) and U.S. Bank (730).
The five lowest-scoring lenders were NewRez (676), loanDepot (692), Freedom Mortgage (699), Guild Mortgage (702) and PNC (704). Last year, PNC was one of the top five lenders in the study.
While Veterans United (777) and Navy Federal Credit Union (753) scored above the industry average, they weren’t ranked because they did not meet study award criteria, J.D. Power said.
Nearly four in 10 homebuyers (38 percent) said they started working with a lender when they first thought about buying. By engaging with borrowers earlier in the house-hunting process, lenders have a better shot at retaining them, J.D. Power said. The percentage of borrowers who said their loan representative should have been more involved rose from 29 percent in 2022 to 40 percent this year.
Bruce Gehrke
“The value equation for mortgage originators has shifted from instant approvals and lightning-fast processing to helpful advice and creative problem solving,” said J.D. Power’s Bruce Gehrke, senior director of wealth and lending intelligence. “Lenders that manage this transition well have a great opportunity to build customer goodwill and limit defection by showing customers they understand their unique needs and the challenges of the current market.”
The nation’s largest mortgage lender, United Wholesale Mortgage (UWM), only funds loans originated by mortgage brokers and was not ranked. While lenders like Fairway and Rocket also do some of their business through wholesale channels, J.D. Power limits its evaluations to lenders’ retail channels.
UWM, which overtook Rocket as the nation’s biggest mortgage lender last year, has competed aggressively on price and is on track to break company records for purchase loan originations in 2023. However, UWM has said it continues to invest in the technology it provides to mortgage brokers to provide a better borrower experience.
“It’s no secret why UWM and the broker community continue to do so well in the purchase market,” UWM CEO Mat Ishbia said on a Nov. 8 earnings call. “Purchase transactions require an expert. They require more attention to detail. They require a higher level of service for real estate agents, consumers and brokers — everybody. And they require an efficient process where speed matters for hitting contract deadlines.”
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Property Chomp's Take:
The old way of doing business in the mortgage industry is officially over. With soaring rates that have forced mortgage lenders to shift their focus from refinancing existing homeowners to providing purchase loans to homebuyers, it's clear that satisfying customers is about more than just offering the lowest rate. Consumers now expect lenders to help them navigate the challenges that can arise during the homebuying process.
According to the latest J.D. Power U.S. Mortgage Origination Satisfaction Study, 69 percent of consumers chose lenders for reasons other than the lowest rate. Factors such as personalized service and assistance in navigating the loan market were cited as important considerations. While technology has made it easier for homebuyers to compare rates with different lenders, Fannie Mae surveys show that one in three homebuyers don't shop around for a loan. However, research by Freddie Mac suggests that homebuyers can potentially save $600 to $1,200 a year by applying for a mortgage with multiple lenders.
To effectively compete in today's market, lenders need to focus on addressing customers' unique challenges and meeting their needs, rather than simply selling a product. This includes providing personalized service, clear communication, and a level of trust that helps customers feel confident in their decision-making process.
The J.D. Power study takes six performance factors into account when evaluating mortgage lender customer satisfaction: communication, digital channels, level of trust, loan offering meets my needs, made it easy to do business with, and people. The average overall customer satisfaction score among mortgage lenders evaluated was 730, up 14 points from the previous year. However, the increase was primarily driven by repeat buyers, while overall satisfaction among first-time homebuyers was down significantly. This reflects the complex lending environment and considerable challenges that customers are currently facing.
Among the top five lenders in terms of customer satisfaction were Fairway Independent Mortgage Corp., Rocket Mortgage, Citi, Prosperity Home Mortgage, and Bank of America. These lenders were praised for their ability to meet customers' needs and provide a positive experience. On the other hand, the five lowest-scoring lenders were NewRez, loanDepot, Freedom Mortgage, Guild Mortgage, and PNC. It's worth noting that PNC, which was one of the top five lenders in the previous year's study, experienced a significant drop in customer satisfaction.
Engaging with borrowers earlier in the house-hunting process can greatly improve a lender's chances of retaining them. Nearly four in 10 homebuyers said they started working with a lender when they first thought about buying a home. By providing guidance and support from the beginning, lenders can build customer goodwill and limit defection.
The value equation for mortgage originators has shifted from instant approvals and fast processing to helpful advice and creative problem-solving. Lenders that successfully manage this transition have a great opportunity to build customer loyalty by demonstrating an understanding of their unique needs and the challenges of the current market.
It's important to note that the nation's largest mortgage lender, United Wholesale Mortgage (UWM), was not ranked in the study. UWM only funds loans originated by mortgage brokers, and J.D. Power limits its evaluations to lenders' retail channels. However, UWM continues to invest in technology to provide a better borrower experience.
In conclusion, the mortgage industry is evolving, and lenders must adapt to meet the changing needs of customers. Providing personalized service, clear communication, and assistance in navigating the loan market are critical for success. By focusing on customer satisfaction and addressing the challenges customers face, lenders can position themselves for long-term success in the market.
