2009 Home Mortgage Origination Satisfaction Study

Buying a home soon? Better plan ahead. According to a new J.D. Power and Associates study, the average time required to approve and close a home loan has increased to nearly 47 days, compared with approximately 30 days in 2008. The reason? Increased scrutiny of loan applications and higher origination volumes driven by increases in refinancing. Not surprisingly, the longer wait times are fueling a decline in overall customer satisfaction with primary mortgage lenders.

According to the company’s 2009 Primary Mortgage Origination Satisfaction Study, overall satisfaction among mortgage customers has declined to 739 on a 1,000-point scale, down 18 index points from 757 in 2008. The study reveals that the increase in turnaround time has a considerable impact on satisfaction, as satisfaction averages only 723 when the time from application to approval takes six or more days, compared with 798 when the process takes less than six days. Similarly, satisfaction drops from 772 to 736 when the time from approval to closing takes 14 or more days.

The study also finds that credit scores are now higher among mortgage customers and the percentage of loan applicants who have been faced with requests for additional documentation has increased considerably—to 45 percent in 2009 from 33 percent in 2008.

“While the more cautious approach to underwriting mortgages is justified, the longer turn times and more numerous requests for information tend to have a negative impact on satisfaction,” said David Lo, director of financial services at J.D. Power and Associates. “Good underwriting and delivering a satisfying customer experience are not mutually exclusive, and some of the negative effects of a tightened lending environment can be mitigated by simply improving communication between lenders and customers.”

The study finds that there are nine key practices that lenders should leverage to optimize customers’ satisfaction with the mortgage origination experience. For example, satisfaction averages 793 among customers whose lender provided and met a time frame for the application/approval process, compared with 632 among those whose lender did not. In addition, satisfaction declines from 781 to 643 when customers were asked to provide the same information more than once.

“The good news for lenders is that optimizing the mortgage experience is as easy as adopting these key practices,” said Lo. “The bad news is that few customers say they have an optimal experience—only 22 percent of customers report experiencing all nine service practices. Among these customers, satisfaction averages 862 points. In contrast, satisfaction averages only 566 points among customers who report that their lenders missed four or more of the key practices.”