Consumer (dis)Satisfaction Indexing

A new survey suggests that mortgage brokers may need to improve their customer relations.

Lending professionals are fond of saying that making loans is an art, not a science. It’s still pretty true, but decision-making is more of a science now at any time in the past. Mortgage origination – now there’s an aspect of the business that’s more of an art than a science. Origination is all about high-touch, customer-centric activities that are influenced by factors often beyond the originator’s control, particularly if it is an independent originator. Through it all, mortgage brokers have been the consumer’s first choice for more than a decade. Is that extraordinary preeminence threatened after all these years? An independent study indicates that the entire lending business has been alienating consumers, and mortgage brokers receive significantly lower marks than the rest of the industry.

What happened? After almost 20 years of building market share, independent originators are facing a real crisis from the very customers who made them a success. Just as surprising, consumers rate the overall loan process lower than any other financial service, as specified by the American Consumer Satisfaction Index. If you like your managed care health insurance program as an example of a customer-friendly process (read in a highly sarcastic tone here), you might be astounded to learn that consumers found it on a par with getting a mortgage. That’s serious.

The study was performed by Claes Fornell International last year and involved what CFI deemed a representative sampling of homebuyers and refinancers, though numbering only 378 people. In the study, respondents gave their recent mortgage experience a 69 out of a possible 100, inferring that almost a full third of the audience was dissatisfied with their transactions.

In comparison to other financial services, retail banking scored 74, five points higher, and life insurance scored 79, a whopping 10 points higher than mortgage lending. Experienced borrowers, already bloodied by previous transactions, apparently had lower expectations than new borrowers, who gave lower ratings to the process.

Most disturbing were the responses from those who used a mortgage broker versus those who did not. As CFI’s press release stated, “Those who used a broker give dramatically lower scores to the process across the board. This poses a serious challenge both the broker community and to those lenders who use brokers as a product delivery channel.” At last reckoning, that was still most of the transactions out there. A “serious challenge to the broker community” may be an understatement; it could represent the leading edge to a trend that could reverse a decade of progress in professional mortgage origination.

The edge given non-brokers to brokers is not an insignificant one. In every category, without exception, brokers were rated lower than their competition.

Based on the results of originators’ efforts over the years, this is beyond surprising – it is shocking. Especially in the areas of personalized service and willingness to refer to others, the results of this study mean either that the current crop of mortgage brokers compares poorly to those of the past, or that the other channels have come a long way in improving their capabilities. We know that over the years, institutional lenders have made their retail channels look more like the independent equivalents; the basic LO position is pretty much interchangeable. In most instances, affiliated loan originators can offer products outside their own employers, whereas in the past they were limited more to their own offerings. Something has changed over time, and the long-held mortgage broker supremacy in the origination sector could be a thing of the past, unless something happens soon.

One of the more ominous implications comes from the statement, “This poses a serious challenge . . . to those lenders who use brokers as a product delivery channel.” What would happen if wholesalers lost faith in the third-party origination model as it relates to mortgage brokers? They could conceivably restrict their business development to institutional lenders’ offices, since those offices often broker out anyway. In the height of the refinance boom, the sheer numbers of loans requiring attention would have taken care of this problem, but the world is changing rapidly. Market size estimates as of this writing still forecast half the volume for next year from the previous years’ levels. If mortgage banks and other institutions have an edge, it may well be in their ability to throw money at marketing, deploying the resources necessary to capture a greater share of a declining segment.

It can certainly be argued that the sampling size is too small to have validity. Can 378 borrowers out of the millions who obtained loans really represent the actual trend of the marketplace? A.C. Neilsen has used similar demographics for 50 years to chart the trends of television audiences, and there has certainly been a great deal of debate as to whether their findings represent a true picture of the nation’s viewing preferences.

Although it is not readily apparent how the sampling was created, GFI took care to balance purchases and refinances to reflect the first half ’03 market, at 34% and 66%, respectively. Of the 378 borrowers surveyed, 181 worked with a mortgage broker, while 198 worked with a “lender only.” Of those who worked with a “lender only,” 165 had a specific representative (presumably an LO) handling their transaction, while 33 did not. Overall, those who worked with an assigned representative rated their transactions significantly higher than those without, 76/67. So that’s an encouraging sign, supporting our long-held assumptions about the value of high-touch.

What can be done to increase general consumer satisfaction in the loan process, and the success of originators, whether independent or affiliated? According to CFI, three areas are of most interest to borrowers. These included processing time, the convenience of the process and the closing, as well as the energy and expertise of the loan representative. Fix these, and we’re on the way to nipping future problems in the bud.

Processing time should be improving, with all the automation we have at our disposal. It could be said that delays in the process over the last few years were caused by volume, not be inefficient processes. While that might be true, few loan professionals will tell you the process is efficient; just look at all that paper, after all. The process should be more digital—the technology is certainly available, waiting for lenders to put it to use. Closings are prolonged by all the paper, both moving it around and getting it signed, and digital solutions have been in place for years. Perhaps with the refinance boom winding down and lenders begin to worry about things other than loan volume; some of these fixes will be made.

As to the importance of the lender representative, that should be the easiest to fix. As the chart indicates, borrowers are saying, “Tell me accurately, tell me quickly and in language I can understand. Then, keep me informed and answer my questions promptly.” What could be simpler, and harder? Mortgage originators have worked hard to maximize their exposure over the years. But customer satisfaction is now demanding some of those resources. It is no longer enough to drag in the apps just to become complacent about service, knowing there’s another borrower coming in right behind the one you lose. That attitude might have worked over the last year or two, but it is doubtful it will play in the months and years ahead. Back to reality, ladies and gentlemen.

Another area of apparent interest to borrowers arose from the study. “Our analysis suggests consumers may be very receptive to the idea of a guaranteed mortgage package,” according to Roger Park, CFI Senior Consultant. It’s not hard to understand why they would be attractive to consumers, hungry for simplicity in this complicated, transactional space. Of course, HUD has been all over this, but with the departure of Mel Martinez, it is difficult to know how soon RESPA reform can be expected. It is clear, however, that lenders that have run with the GMP concept, such as ABN Amro, have had tremendous success with it. Consumers have spoken, as they will often do, and it’s up to the industry to listen.

The bottom line of this whole surprising development was well articulated in CFI’s announcement regarding the study, in which they pointed out the obvious: “Mortgage lenders will increasingly need to differentiate themselves in these areas to meet with success in the marketplace as the era of ‘how low can you go’ interest rates and huge refinancing volumes draws to a close.” Those who find ways to make the experience simpler and easier to understand, and who stay in close contact with their customers, will become the providers of choice.

Rather like the professional mortgage originators of the previous almost-20 years, come to think about it.

How is Your CSI?
If you don’t have an ongoing program of Customer Satisfaction Indexing, now’s the time to start. You can make it simple by developing a quick questionnaire to send your borrowers using a mail merge from your organizer software. A few critical tips: First, be sure to include postage for the return of the questionnaire; Second, keep it customer-friendly by making it brief and easy to complete – no more than 60 seconds of your customer’s time, unless they elect to add comments.

If you get some surprising answers, consider getting more detail from the borrower with a follow-up phone call. You may have a problem with someone’s attitude within your organization that surfaces using CSI. If you do, research the matter carefully and take appropriate action. Be generous with your thanks to customers for taking the time, and consider a premium, such as a discount on a future service, as an incentive to respond.
Your mailing can be as detailed as you like, or as simple as this:

At XYZ Mortgage, your satisfaction is our greatest concern. You can help us to serve you better by taking a moment to give us your feedback on your recent transaction. Please rate us from 1 (low) to 10 (high) by circling your choice on each item and return it in the enclosed stamped envelope. Thanks for your time!

Friendly, helpful attitude: 1 2 3 4 5 6 7 8 9 10
Answered all my questions: 1 2 3 4 5 6 7 8 9 10
Returned my calls quickly: 1 2 3 4 5 6 7 8 9 10
My Loan Rep was easy to reach: 1 2 3 4 5 6 7 8 9 10
Kept me informed of my loan’s status: 1 2 3 4 5 6 7 8 9 10
Made sure I understood the process: 1 2 3 4 5 6 7 8 9 10
Was convenient to deal with: 1 2 3 4 5 6 7 8 9 10
Gave me the best possible rate and fees: 1 2 3 4 5 6 7 8 9 10
Were knowledgeable and professional: 1 2 3 4 5 6 7 8 9 10
Overall satisfaction with my transaction: 1 2 3 4 5 6 7 8 9 10

Any other comments for us?

If you would like to recommend our services to a neighbor, acquaintance or family member, please let us know how to reach them!

Once you have the customer feedback in hand, take the necessary steps to correct any real or perceived negative opinions. In addition to calling unhappy customers, you may need to enhance your overall customer service program and expand your marketing efforts to help tell your positive story.

–James Hennessy