More and More Buyers Prefer Non-Bank Lenders

More and More Buyers Prefer Non-Bank Lenders

While many customer-service based businesses suffered (and continue to suffer) during the COVID-19 pandemic, mortgage servicers actually seemed to have their ducks in a row (mostly) during the course of 2020 and into 2021. In fact, according to a J.D. Power satisfaction survey released at the end of July, mortgage servicers actually managed to make their customers happier over the past year than they have in years prior. Industry-wide, mortgage servicers raised overall satisfaction scores by six points on a 1,000 point scale. However, a lot of that satisfaction does not have much to do with traditional bankers, which consumer-lending experts say could spell trouble for traditional and bank-affiliated lenders in the near future.

“Some of the biggest gains in customer satisfaction [were] driven by at-risk and moderate-risk customers who participated in forbearance programs,” warned Jim Houston, direction of consumer lending intelligence at J.D. Power. He warned that mortgage servicers will need to “up their customer engagement games as the marketplace stabilizes.”

Additionally, much of the rising satisfaction with the home-lending industry is linked to non-bank lenders, who saw a 17-point increase in customer satisfaction over the past year. Although bank-affiliated servicers traditionally outperform non-bank lenders and did so in 2020 as well, they gained only 4 points in customer satisfaction scores. This means the bulk of the increase was driven by the non-bank servicers. Rocket Mortgage (which includes Quicken Loans) ranked first in customer satisfaction for the eighth consecutive year.

Houston observed that about one in five mortgage customers had no interaction with any loan servicer in 2020, which means that the overall boost in satisfaction is likely to fade as mortgage servicers reengage and begin, in some cases, the foreclosure and eviction process when customers are unable to pay their mortgages or make up for missed payments during forbearance. “As we look at post-pandemic customer behaviors and the responses of low-risk customers, we see that lift in satisfaction may be short-lived,” he said.

For real estate investors, this looming dissatisfaction with traditional lenders could represent significant opportunity. Not only is it likely that sellers may be more open to creative financing strategies, like seller-financing, but many buyers may begin to be more open to creative purchasing strategies as well.