Mortgage origination satisfaction: How the industry is performing in tough times

Survey reveals the highest ranked lenders

Mortgage origination satisfaction: How the industry is performing in tough times

Lenders have increasingly had to pivot in the past year to meet the needs of a purchase-heavy market and changing the way they deliver on key elements of the borrowing experience, according to a newly released survey.

The upshot: Given the climate of high interest rates, customer service among lenders is at a premium. The reason for this is the 30-year mortgage hovering at nearly 8%, the highest it’s been since November 2000.

Such are the main findings of the JD Power 2023 US Mortgage Origination Satisfaction Study. The study found the improved service level could be hard to maintain as the effect of aggressive cost-cutting is starting to take its toll, while market conditions are unlikely to improve in the foreseeable future.

Craig Martin, executive managing director and global head of wealth and lending intelligence at JD Power, took time to discuss the findings during a telephone interview with Mortgage Professional America. While there were few surprises emerging from the latest survey given the tough mortgage climate, he contrasted it with the recent past when mortgage rates were at historic lows.

It’s a far cry from those historically low rates

“Two years ago, the mortgage market was an ultra-low goldmine in which lenders were making big profits and the primary challenge was keeping up with demand,” he said. “It’s the opposite today with high rates and a lack of affordable homes lending to a limited number of eligible borrowers.”

The short of it is that lenders now have to tailor to customers in order to address their needs amid a changed landscape, he said: “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,” he said.

“Nothing was a shocker,” he said of the most recent findings. “There’s kind of an ebb and flow with what’s going on. The one thing that’s dragging scores relates to the product.”

Yet at its core, the customer satisfaction quotient is affected greatest by the current climate, he noted: “Fundamentally it’s about rates and fees and what goes into the product for the consumer in the rate environment we’ve been experiencing over the last year,” Martin said. “It’s challenging in that there’s an affordability challenge, and there’s certainly an unavailability of homes. That hits the consumer rather directly and impacts the experience.”

What primarily registers in such a challenging environment is a corrosion in satisfaction, he added. “In the service space, negative financial circumstances – whether it’s interest inflation and all these other factors – is what causes the financial position of the consumer to be impacted to drive down satisfaction. All those things will cause you to be less satisfied. In the mortgage lending space, it’s the same concept.”

Key findings in the survey reflect the consumer satisfaction downgrade:

  • Overall satisfaction rises despite record high rates: Overall customer satisfaction with mortgage lenders is 730 (on a 1,000-point scale), up 14 points from a year ago, even as the average mortgage rate has climbed to its highest level in 23 years and overall lending volume has declined.
  • Beyond rates: Almost one-third (31%) of mortgage customers say they selected their lender solely because they offered the lowest interest rate. More than two-thirds (69%) chose lenders for other reasons, such as personalized service and ability to help navigate the loan market.
  • Lenders engaging earlier but more is wanted: Many lenders are finding that by engaging with borrowers earlier in their shopping journey, they can retain those customers throughout the process. Overall, 38% of mortgage customers say they started working with a lender when they first thought about buying. The percentage of borrowers who say their loan rep should have been more involved has risen to 40% from just 29% a year ago.
  • Struggling first-time homebuyers: While overall customer satisfaction with the lending process is up this year, the increase has been driven primarily by repeat buyers. Overall satisfaction among first-time homebuyers, however, is down significantly. This reflects the complex lending environment and considerable challenges customers are facing.

Lenders need to make the transition to a tougher market

Bruce Gehrke, senior director of wealth and lending intelligence at JD Power, spoke to the latter factor: “The value equation for mortgage originators has shifted from instant approvals and lightning-fast processing to helpful advice and creative problem solving,” he said. “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.”

In terms of lenders with the highest mortgage origination satisfaction results on a 1,000-point scale, coming out on top were: Fairway Independent Mortgage Corp. ranking highest in mortgage origination satisfaction, with a score of 776. Rocket Mortgage (759) ranked second, and Citi (756) came in third.

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