CFPB: Buyers aren't shopping around for a mortgage

by MPA13 Jan 2015
Americans may be spending more time shopping for clothes than a mortgage according to a new report from the Consumer Financial Protection Bureau (CFPB), which also released a new "unbiased" tool to help consumers shop for a mortgage. The regulator claims its new "Owning a Home" tool helps borrowers find the best rates in their area based on data the CFPB gathers from lenders.

The education tool is a part of the CFPB's Know Before you Owe mortgage initiative announced in November 2013. The campaign’s loan disclosure documents were created in an effort to more efficiently lay out mortgage terms for homebuyers and include two new forms: the Loan Estimate and the Closing Disclosure to ensure compliance.

According to new data in the National Survey of Mortgage Borrowers, almost half of consumers do not shop around for a mortgage when purchasing a home. Based on the study, the CFPB's latest report found that informed consumers are more likely to shop, especially if they are familiar with available mortgage rates.

“Our study found that many consumers are not shopping for a mortgage. Consumers put great thought into the choice of a home, but the mortgage process continues to be intimidating,” said CFPB Director Richard Cordray. “The Know Before You Owe, Owning a Home toolkit, makes it easy to see how shopping for a mortgage can translate into big dollars saved in the long run. We want to enable consumers to be more savvy shoppers.” 

The CFPB's report also found:
  • Three out of four consumers only apply with one lender or broker: While half of consumers shop around to see who advertises lower rates, fewer than one out of four borrowers actually end up submitting a loan application to more than one lender or broker. These consumers are not filling out applications with multiple lenders to see which one can offer them the best deal. 
  • Most consumers get their information from lenders or brokers, who have a stake in the outcome: The survey asked recent mortgage borrowers whether they used different information sources. Respondents were asked to report whether they used each source a lot, a little, or not at all. Consumers could pick multiple categories. Among the findings: 70% of consumers report relying on their lender or mortgage broker a lot to get information about mortgages. While lenders and brokers can be valuable resources, they have a stake in the selling of the mortgage, so what is best for the lender or broker is not always best for the consumer. 
  • Borrowers who prioritize the terms of the loan over the characteristics of the lender are more likely to shop: The survey asked borrowers whether characteristics of lenders or mortgage brokers were “very,” “somewhat,” or “not at all” important in their selection. The survey found those who listed lender characteristics as important, instead of the loan terms, are less likely to shop. Specifically, the survey found that among all borrowers – those who shopped and those who did not – 42% said having an established banking relationship with the lender is “very important.” Since most borrowers probably only have a few banking relationships, this likely inhibits shopping. 
  • Informed consumers are twice as likely to shop: Consumers who are confident in their knowledge about the mortgage process are more likely to shop around. For instance, consumers who are confident about their knowledge of available interest rates are almost twice as likely to shop as consumers who are unfamiliar with available interest rates. The survey found that 55% of shoppers said they were very familiar with mortgage rates, while 30% of shoppers said they were not at all familiar. 
Failing to shop means money lost for consumers, according to the CFPB. "Consumers who consider the product offerings of multiple lenders or brokers may save substantial sums," the report stated.


  • by sanman | 1/13/2015 9:41:55 AM

    why would anyone want the american nightmare, or as i call it the money pit ! Many americans prefer to live in two or three bed room apartment rather then pay a mortgage that will never give you anything back and makes the banks rich and the cosumer poor ! if you live ina rented house or apartment the maintance falls in the owner and so do repairs and upgrades ! taxes and water tax is also on the owner if something breaks the owner must fix! cant wait to get rid of my home; what a dumb move !

  • by | 1/13/2015 9:54:13 AM

    True Sanman but if you're paying rent in the same home for 5 years then you're just helping the homeowner gain equity. If you reside in an area you feel you're going to set roots within then buying a home is a great investment.

  • by Loan Officer | 1/13/2015 11:06:02 AM

    Brokers / Lenders have what is called a pull thru ratio. When you lock a mortgage for a borrower you must close said mortgage. Penalty for not closing mortgage places Broker / Lender in Tier ll or tier lll pricing. This destroys the ability of the mortgage officer to be competitive. Not being able to originate mortgages equals no pay for underwriters, processors, Escrow officers, Appraisers ect.. Before suggesting that borrowers submit multiple mortgage packages - do some homework yourself. Submitting multiple applications is a flat out horrible unethical selfish practice that destroys the lives of others. You have 20 people working on your deal. These workers do not get paid until the mortgage closes and then you close with another Lender? And this is only the tip of the Ice burg what about the money that you have locked up that is now not available for others.


Should CFPB have more supervision over credit agencies?