Study shows borrowers more satisfied with lending process

The J.D. Power 2015 U.S. Primary Mortgage Origination Satisfaction Study shows that customer satisfaction increased 7 points year over year, going from 786 to 793. Customer satisfaction is calculated on a 1,000-point scale.

How is satisfaction measured?

J.D. Power measures mortgage origination satisfaction by evaluating the following factors:

• Application/approval process

• Interaction

• Loan closing

• Loan offerings

• Onboarding

• Problem resolution

The increase in overall satisfaction was led by a 22-point jump in the application and approval process.

Additionally, borrowers who took advantage of digital channels were more satisfied with completing an application, submitting documents and receiving status updates than those who took a paper-based route.

The speed of the lending process also affects customer satisfaction. When borrowers made it to the closing table earlier than expected, satisfaction received a boost. When the process was drawn out, satisfaction suffered.

“All things being equal, a longer process is a less satisfying process,” says Craig Martin, J.D. Power’s mortgage practice director. “There are a lot of things that can be done to offset that, (such as) good communication, setting expectations upfront accurately and reinforcing those throughout the process so the customer understands.”

What about TRID?

In its release, J.D. Power mentioned the “Know Before You Owe” rule that took effect in October and how the regulations have the potential to prolong the mortgage lending timeline.

For example, before closing day borrowers now receive a closing disclosure — instead of the HUD-1 settlement and final Truth in Lending Act statements —and it comes with a three-day waiting period.

Though, lenders who are transparent with borrowers will likely lessen the chances of dissatisfaction.

“Customers are not going to really accept the answer of, ‘Well, the government added some things to our process so it takes longer,'” Martin says. “That’s an excuse that the borrower is not likely to appreciate.”

Top-scoring lenders

The top five mortgage providers in J.D. Power’s study — along with their satisfaction scores — are:

• Quicken Loans, 850

• Fifth Third Mortgage, 812

• Bank of America, 811

• BB&T, 811

• CitiMortgage, 809

This is the sixth consecutive year that nonbank lender Quicken Loans has claimed the top spot in the mortgage origination study.

When choosing a mortgage lender, remember to shop around as you would for any other product or service.

“Do your research,” Martin says. “Take the time to consider different offers and be a smart consumer.”

Job market rebound to affect mortgage rates

The economy added 271,000 jobs in October, according to the U.S. Bureau of Labor Statistics. That’s a significant increase from the previous two months.

“Consumers are clearly kicking up their feet and going out,” Diane Swonk, chief economist at Mesirow Financial in Chicago, writes in a blog post. “Increases in the minimum wage and a surge in hiring of low-wage workers was a primary reason for improvements in consumer sentiment in October.”

The unemployment rate ticked down from 5.1 percent to 5 percent, which is the lowest level since April 2008. The number of unemployed people was virtually unchanged at 7.9 million. The labor force participation rate also kept its place at 62.4 percent.

Workers collect more coins

August numbers were revised upward from 136,000 to 153,000, though September was revised downward from 142,000 to 137,000. Over the past 12 months, the economy has added an average of 230,000 jobs each month.

Average hourly earnings rose by 9 pennies from September to October, coming in at $25.20. Over the year, hourly earnings increased by 2.5 percent.

“The tightening labor market may finally be having an impact on wages though the jury is still out on that,” says Joel Naroff, president and chief economist for Naroff Economic Advisors in Holland, Pa. “It will take a few more months of solid increases before we can say a trend is in place.”

What’s all this mean for mortgage rates?

Mortgage rates have already increased on news that the Federal Reserve may raise rates at its December policy meeting, and the better-than-expected employment data may push them even higher, says Jonathan Smoke, chief economist for Realtor.com.

“(The Nov. 6) job report will influence the long-term bond market, so mortgage rates will increase in response. The average 30-year conforming rate was 3.99 percent (Nov. 5), having increased 9 basis points in one week due to the consensus view of a strong, but not this strong, employment report,” he says. “The 30-year conforming rate will likely top 4 percent as a result of this news.”