Banks gave good service during refinancing boom, survey finds

October 18, 1992|By Phil Roosevelt | Phil Roosevelt,American Banker

NEW YORK -- Customers give banks good grades for their handling of the wave of mortgage refinancings early this year, according to the American Banker's annual consumer survey.

The survey found that 82 percent of people who refinanced mortgages in the 12 months through early May were satisfied with the service they received.

Though somewhat below consumers' overall satisfaction level with financial institutions, the rating is impressive in light of the staggering volume of refinancings that banks have been handling. In the past, refinancing booms have produced widespread complaints of service snarls.

"It's been fairly smooth sailing," said Mark Bell, a Chicago-based financial planner who has helped more than 20 clients refinance since late last year. "Most of the people we have worked with have been quite satisfied with the turnaround and have been able to close on time."

The survey found that 50 percent of refinancers were completely satisfied and 32 percent were satisfied. Thirteen percent were neutral on a five-point rating scale.

Counting refinancers and consumers who took out loans to buy homes, 42 percent were completely satisfied and 33 percent were satisfied, the survey found.

When asking consumers about overall satisfaction with their primary financial institutions, the survey came up with higher scores. On a slightly different four-point scale, 59 percent were very satisfied, 35 percent satisfied and 5 percent not satisfied. Fewer than 1 percent gave no answer.

Fueled by the lowest interest rates in almost 20 years, mortgage originations are expected to hit $800 billion this year, topping last year's record by 48 percent, according to the Federal National Mortgage Association.

The surge has been most evident in refinancings, which were nearly as common among those responding to the survey as were newly originated mortgages to buy homes.

During the last refinancing boom, in 1986-1987, consumer complaints about service delays were legion. Many consumers said lenders' commitments to certain rates expired before the lender was able to close the loan, meaning consumers wound up paying higher rates than they had expected.

This time around, lenders were quick to hire additional people and put in more phone lines.

Mortgage professionals also said they were careful not to inspire inflated consumer expectations. Lenders frequently warned loan applicants from the outset to expect some delays.

The 57 people in the survey who took out first mortgages to buy homes were less satisfied than the refinancers. Of the 57, only 42 percent were completely satisfied, vs. 50 percent of the refinancers.

The disparity may be a warning signal to lenders. In serving the hordes of refinancers, lenders could be neglecting the homebuyers, their bread-and-butter customers for the long term.

Real estate agents might take note of which lenders reduced service to homebuyers during the refinancing frenzy and direct their business elsewhere.

Another possibility is that many homebuyers, unlike refinancers, are simply unfamiliar with the mortgage process and its pitfalls.

"They've never seen how complicated it can get," said Paul Havemann, vice president of HSH Associates, a mortgage-market researcher in Butler, N.J.

In line with that idea, the Gallup interviewers found that 32 percent of people who got new mortgages or refinanced during the past year found the application confusing.

Complaints about the bulk and complexity of mortgage application forms have abounded for years.

Among people who were not satisfied, the most common complaint, registered by 16 percent of those responding, was that the lender "sold my mortgage." This apparently reflects the growing practice among originators to sell not only the mortgages but also the rights to process monthly payments.

In the past, mortgage sellers generally retained those servicing rights, and buyers, as a result, often did not know their loans had been sold.

Some consumers have complained that buyers of servicing rights incorrectly record the loans as delinquent because of mix-ups during the transfer. Others have simply objected to sending their monthly mortgage payment to a company they do not know.

Among other mortgage-related complaints were unspecified poor service, high interest rates, paperwork problems and lenders who are hard to reach.

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