Mortgage industry under fire again … from younger buyers

A Bank of America branch in New York City.

Carlo Allegri | Reuters
A Bank of America branch in New York City.

After arguably the worst decade in history for the mortgage industry — a foreclosure crisis accentuated by predatory lending and forged, “robosigned” documents — things were slowly improving.

Now, consumers are concerned again. This time it is not fraud, but basic customer service, and it may be more about the borrowers than the lenders.

Mortgage company customers reported “significant declines” in satisfaction this year after several years of steady improvement, according to a new survey from J.D. Power. The survey looked at customer satisfaction in six specific areas: new customer orientation; billing and payment process; escrow account administration; interaction; mortgage fees; and communications. It then calculated satisfaction on a 1,000-point scale.

The drop in perceptions of the industry was driven primarily by a significant jump in the number of customers saying that their mortgage servicer is focused more on profit than customer experience. At least 10 percent said their time was wasted during interactions with their mortgage servicer. Satisfaction was higher, however, among those who used the servicer’s website or mobile app.

This shift may be more generational than anything else. Lenders are dealing more with millennials now, who are finally entering the housing market and who demand and expect transparency, expertise and, surprisingly, personal interaction.

“Everyone thinks that about millennials, that they’re all tech all the time, but the truth is their heavy online reliance is research-based, but they’re also using in-person and calling channels more often than not for mortgage originations. They are oriented toward that expert and advisory piece,” said Craig Martin, senior director, mortgage practice at J.D. Power.

That appears to be why Quicken Loans has ranked No. 1 in customer satisfaction four years in a row and tops the list now. Perception is that the online lender is a technology company, but Martin points to a very customer-oriented model. Customers can’t walk into a Quicken, but they seem to like the service they get both online and on the phone.

Meanwhile the big banks are still dealing with bigger perceptions, some stemming from the financial crisis and others from current woes.

Bank of America, which bought Countrywide Financial during the crisis, and was then saddled with hundreds of thousands of delinquent loans, is actually climbing the ranks in the satisfaction survey. As time passes, the legacy fades. Wells Fargo, however, which fared better during the crisis, had its own credit card scandal more recently, and that continues to bleed into all facets of consumer banking.

The change in customer satisfaction may also be due simply to a shift in the types of loans being originated today.

“It’s less about what the servicers are doing and more about the market conditions,” said Martin. “Now that the refinance boom has dropped off, there is a lift in purchase loans and a lot more first-time buyers. You have a new set of expectations.”

Martin points to the years since the financial crisis, when lenders were trying to rehabilitate their reputations. They were largely working with current customers, many of whom were taking advantage of record-low mortgage rates through refinances. Those customers had been through the worst of the crisis and were impressed by the new levels of transparency and relative simplicity brought about by new regulation and an industry overhaul.

Refinance volume boomed after the recession but has dropped off by half in just the past year, and purchase applications are now coming back as housing demand surges.

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