While borrowers might be expected to cite mortgage rates as the top reason for selecting a specific lender in the current environment, J.D. Power sees this as a potential problem for lenders. 

With mortgage demand down amid rapidly rising rates, the consultancy’s recent mortgage satisfaction study showed few differences in customer satisfaction among the top lenders. Even lenders at the bottom of the rankings did not fall too far behind the leaders. 

“The good news is the market as a whole is doing pretty well – we see that the loyalty and satisfaction scores are fairly high, and the customers are generally saying they’re having a good experience,” said Craig Martin, J.D. Power’s executive managing director and global head of wealth and lending intelligence. “The challenge for lenders is … what’s next? What are you going to do to differentiate?”  

Mortgage lending has reached a state that Martin calls commoditized, with homebuyers having numerous – often similar – options for mortgages that at least meet homebuyers’ minimum expectations.  

The result can be seen clearly in consumer behavior. Most homebuyers spend about as much time researching their next television purchase as they do their mortgage lender, according to a survey by Zillow Home Loans. Research for car purchases and vacation options consumed more of respondents’ time, the survey reported.  

Zillow’s survey of homebuyers showed that 72 percent of respondents did not shop around for a mortgage that best suited their financial situation and had no plans to shop around. Of the respondents who had already submitted a mortgage application for pre-approval, 46 percent said they submitted only one application.  

The top reason for not shopping around for a mortgage was concern about hurting credit scores, which was cited by 30 percent of respondents. Other reasons included satisfaction with first lender contacted (24 percent), too much time and effort (19 percent) and all lenders offer the same rate (15 percent). 

Advice a Potential Selling Point 

While the historically low interest rates over the past two years meant lenders often had more than enough customers, this year has seen mortgage demand decline, increasing competition among lenders. 

New Hampshire has seen the number of residential mortgages issued this year through the end of October drop 36 percent year-over-year, according to The Warren Group, publisher of The Registry Review. The number of purchase mortgages issued has declined 11 percent, from nearly 14,000 during the first three quarters of 2021 to about 12,300 during the same period this year. 

With the market now focused on the purchase mortgages, Martin sees the current environment as giving lenders a chance to look at how to move beyond the transactional aspects of the mortgage process.  

“The future of the marketplace is: How do you help me do more than just get a product or get a good rate?” Martin said. “Those are good things, but I need something more if I’m going to pick you versus the [lender] down the street.” 

The J.D. Power 2022 U.S. Mortgage Origination Satisfaction Study was conducted from June through August and included responses from 5,915 customers who originated a new mortgage or refinanced within the past 12 months. 

While J.D. Power’s study captured national and super-regional lenders, Martin said the findings apply to community-based lenders as well.  

Giving advice and guidance to customers months before they plan to buy a home could help lenders differentiate themselves, Martin said, an approach that could benefit community-based lenders. By focusing on building relationships and understanding customers’ financial goals, Martin said, community lenders have opportunities to discover ahead of time who might be a future homebuyer.  

The complexities of rising interest rates and customers’ financial situations give lenders additional opportunities to start working with potential homebuyers earlier in the process, Martin said. J.D. Power has found that borrowers who received guidance earlier in the process had increased satisfaction with the mortgage process. 

And how that guidance is provided could also help lenders differentiate themselves, he added. 

“Expertise often comes from being able to simplify and explain things in a way that makes good sense to a consumer, not necessarily to another expert,” Martin said. “That’s another piece of the puzzle is finding a way to connect with that customer who is not a financial expert, but coming to you for financial expertise, that I think is going to be really critical going forward.” 

Communication Need Seen 

Better communication throughout the process could also help lenders set themselves apart. J.D. Power’s study found that only 48 percent of mortgage customers were kept fully informed in all the phases of the mortgage process.  

While technology has improved mortgage processes for both borrowers and lenders, J.D. Power found that two-thirds of customers still interact with representatives by phone.  

Lenders can run into problems with communications that do not match customer expectations, Martin said, from texts that ask confusing questions to inconsistent messages received from different communication channels. 

“Technology is great, and texts are awesome … but if it triggers a reaction that is concern and worry, and asks questions, it’s creating extra work for people; it creates inefficiencies,” Martin said. “What was theoretically designed as a really effective, always-on communication method, if it’s sending information that is misinterpreted or inaccurate, it really can cause a problem.”  

While referrals from real estate agents provide loan officers with a key source of business, relying too much on the real estate industry could put lenders at a disadvantage, Martin said.  

The more critical the real estate agent is to providing homebuyers with information, the less satisfaction borrowers have with the mortgage origination process, Martin said. He added that customers could see lender referrals as simply “a replaceable piece of the puzzle.”  

“As lenders think about what is their role in the process, if they’re being brought in at the end by a real estate agent … then you’re just a product, and you become that commodity,” Martin said. “How you think about partners and influencers is going to be another key piece.”