Is Our Romance With Mortgage Lenders About to End?

Like in many meaningful relationships, the participants are not always sure what they're looking for.

For a while there, we Americans were crushing hard on our mortgage companies. They walked us through forbearance programs during the pandemic, showed kindness by helping some of us renegotiate (and refinance) our mortgages, and stayed open throughout COVID-19, even though most of their employees worked from home.

According to Jim Houston, director of consumer lending intelligence at J.D. Power, "Mortgage servicer satisfaction was buoyed by the industry's response to the pandemic, with some of the biggest gains in customer satisfaction being driven by at-risk and moderate-risk customers who participated in forbearance programs."

Industry-wide, mortgage servicers earned high praise throughout the worst of the pandemic. Today, it appears that we're cooling on them somewhat. According to the latest J.D. Power 2021 U.S. Primary Mortgage Servicer Satisfaction Study, folks aren't quite as fond of traditional mortgage lenders as they were.

And as Houston describes it, "As we look at post-pandemic customer behaviors and responses of low-risk customers, we see that lift in satisfaction may be short-lived. In fact, despite the attention on relief programs, nearly one-fifth of current mortgage customers have had no interaction with their servicer during the past year. Mortgage servicers will really need to up their customer engagement games as the marketplace stabilizes."

Learn more: How to Refinance Your Mortgage

Who's out and who's in

Like a pair of comfortable socks, traditional lenders like banks and credit unions remain useful, but no longer provide the thrill they once did. It's the fintech mortgage lenders, like Rocket Mortgage, that blow people's hair back. In fact, Rocket Mortgage was the highest-ranked mortgage servicer in the J.D. Power study, beating the nearest competitor by 35 (out of 1,000) points.

According to Houston, customer satisfaction is climbing higher among non-bank lenders. "What we've slowly seen is that the fintech, non-traditional lending institutions do better."

It's important to note that banks have traditionally enjoyed the highest satisfaction levels, and overall, are still doing relatively well. Customers may have liked them more during the worst of the pandemic than they do at the moment, but that doesn't mean it's all bad news for traditional lenders. Many are taking a closer look at fintechs and figuring out what the non-traditional lenders are doing to get people excited.

For one thing, it's easy to see that customers appreciate instant gratification. A home buyer can decide to purchase or refinance a house, and almost immediately have a loan decision in hand. Rather than sit down with a loan officer in a traditional lender's office, a home buyer can do everything online or from a smartphone. And it's making customers happy.

Learn more: How to Buy a House

Here's why relationships get sticky

Although many home buyers appear to prefer the DIY nature of borrowing from a fintech, in their hearts, it's customer service they crave.

"Customers are saying that even in distress, they appreciate the ability to interact with a lender. They want a lender with empathy for a borrower's circumstances and one that offers solutions that work," Houston said.

So which is it? Do home buyers want technology, or do they want customer service? It appears that the magic formula may be a mashup of both -- a lender that provides compassionate customer service and innovative 21st-century technology.

If a mortgage lender were to ask Jim Houston how to construct the perfect, customer-service-centric company, he would have a ready answer. "My recommendation is to create an environment where a borrower feels like part of the family, and you take care of them like family."

And if being part of that family includes access to the best technology available today, it's probably going to be a love connection.