Effect of secondary loan sales are disastrous, study says
By SAM GARCIA
12/17/2001

A new study by J.D. Power and Associates found that borrowers' experiences with lender interactions beyond mailing a monthly payment greatly influence their likelihood to use that lender again or recommend the lender to others. The "Home Mortgage Study" was based on more than 6,800 responses from U.S. home mortgage customers.

J.D. Power is a market research firm that provides quality and satisfaction measurements.

Apparently, the origination process has had "the least impact on the overall, ongoing level of satisfaction a customer has with their lender," said Frank Forkin, who is a partner at J.D. Power.

Among the large national lenders in the survey, Countrywide Mortgage -- which reported $17 billion in November production -- ranked highest in overall customer satisfaction. Here's a look at lender rankings:

#1 ranking Countrywide Mortgage
#2 ranking GMAC Mortgage
#3 ranking Bank of America
#4 ranking Wells Fargo
#5 ranking Citi Financial
#6 ranking Chase Manhattan
#7 ranking Washington Mutual
#8 ranking Homeside Lending

J.D. Power said that ABN AMRO, Cendant, Fleet, Golden West Financial Corp./World, National City, North American/Dime and PNC were not ranked due to insufficient sample size.

Last week, #7 Washington Mutual said that it has inked an agreement to acquire the operating assets of #8 HomeSide Lending from National Australia Bank. In that deal, Washington Mutual will subservice HomeSide's $187.4 billion mortgage servicing portfolio.

In an April 2001 survey, American Express found that just 12.3 percent of the respondents chose "the customer service they provide" as the most important factor when choosing a mortgage provider. The most important factor in that survey was "having the lowest interest rate" (67.9%). "Brand Name" was chosen by only 8.6% of the respondents. American Express' study had 938 respondents, of which 67.8% -- or approximately 636 -- were homeowners. American Express' website, AmericanExpress.OurLoans.com, provides mortgage financing through PHH Mortgage Services.

"As competitive pricing becomes more transparent to the customer, home mortgages inevitably become more of a commodity," said J.D. Power's Forkin. "Where lenders have become largely indistinguishable based on interest rates, points and closing costs, the importance of the customer experience is growing as a differentiator."

Gomez, Inc. -- which measures the quality of online lenders -- reports in its Fall 2001 Scorecard that Countrywide ranked 2nd, Washington Mutual ranked 7th and GMAC ranked eighth. Gomez' overall score is based on ease of use, customer confidence, on-site resources and relationship services.

J.D. Power's survey reported that 40 percent of the customers' loans were resold, a practice that "appears to be a recipe for disaster for customer loyalty and advocacy since the customer typically has no idea that their originator is going to sever ties nor who their new mortgage company is going to be." Forkin added, "consequently, only one-third as many of these borrowers are likely to recommend their current lender."

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