AGOURA HILLS, CA -- Most mortgage borrowers aren't loyal to their lender and if their lender sells their loan, lender loyalty takes an even bigger hit.

J.D. Power and Associates "Home Mortgage Study" study discovered that borrowers whose loans were sold were significantly less happy with their current lender than those whose lenders didn't sell their loans.

Among home owners with one lender and one mortgage during their home ownership only 37 percent would use the lender again in the future and only 31 percent would recommend the lender.

Among home owners with one mortgage but multiple lenders during home ownership only 19 percent said they would use the current lender, while 11 percent said they would recommend that lender.

"The industry practice of mortgage reselling 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," said Frank Forkin, a partner at J.D. Power and Associates.

Almost all lenders package mortgages as mortgage-backed securities and sell them to investors so they have more money to lend. The lender who sells your mortgage may or may not retain it's servicing, including billing you for your monthly payment, sending your annual interest rate statement and other services.

Unfortunately, it's difficult to choose a lender based on how it's going to service and manage your mortgage after the loan is closed. While the originating lender must disclose at the time of application the percentage of originated loans it actually services, that percentage is based on past experience and does not guarantee the lender will or won't service your loan in the future. Moreover, a general average leaves room to sell or not sell individual loans.

The J.D. Power survey found four out of 10 mortgage customers are currently being serviced by lenders that didn't originate their contract terms. These customers, whose mortgages had been resold to another lending firm, were significantly less happy with their current lender.

Based on more than 6,800 responses from home mortgage customers nationwide queried about the nation's largest mortgage lenders, consumers preferred Countrywide Mortgage, GMAC Mortgage, Bank of America, Wells Fargo, Citi Financial, Chase Manhattan, Washington Mutual, and Homeside Lending -- in that order.

J.D. Powers says because a home mortgage is not a frequent transaction, consumers have few occasions to interact with their lender and each "touch point" is critical in influencing customer satisfaction.

For those borrowers who interact with their mortgage lender beyond mailing a monthly payment, their experiences greatly influence their likelihood to either recommend their lender to others or to continue to use their current lender as long as they are in need of a mortgage.

Consumers were most satisfied with their lender when they refinanced their only mortgage with the same lender. Among that group, 41 percent said they would continue to use that same lender, while 36 percent said they would recommend the lender to others.

Among consumers who had a refinanced mortgage sold to one lender, 20 percent said they would continue to use the new lender, while 19 percent said they would recommend the lender to others.

"As competitive pricing becomes more transparent to the customer, home mortgages inevitably become more of a commodity," said 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 and a defensible competitive advantage," he added.

Experts caution, however, no matter how "transparent" competitive pricing becomes among major lenders, borrowers should shop among loan sources of all sizes and also ask local real estate brokers for their advice.

For more articles by Broderick Perkins, please press here.

Published: December 21, 2001

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.