Mortgage lender reputation is No. 1 factor in consumer choice: survey

Key to a consumer's choice of originator in 2020 was its reputation, the National Survey of Mortgage Originations found. A 76% share of purchase applicants and 71% of refinancers responded said this was the primary factor for choosing a lender.  

The data was released by the Federal Housing Finance Agency and Consumer Financial Protection Bureau and comes from the National Mortgage Database.

When asked why the borrower picked a particular lender or broker in 2020, 46% of purchase applicants and 49% of refinancers said a paperless or online process was an important factor in their choice. That compared with 40% of purchase borrowers in both 2018 and 2019 and for refinance applicants, 45% in 2018 and 44% in 2019.

But 72% of purchasers and 82% of refinance applicants in 2020 only applied with a single lender or broker. In 2020, 50% of purchase respondents said they went directly to a lender, down from a peak of 59% in 2013 and 2014. Another 45% went through a broker and 5% obtained their loan via a homebuilder.

For refinancings, 58% went to a lender; in 2013, it was 73%.

Another 42% went to a mortgage broker, the highest share since the survey started.

Of those that did apply with more than one originator, 85% of purchase borrowers and 90% of refinancers were looking for better loan terms. At the same time 30% and 42% respectively, said they did so based on information found on the Loan Estimate disclosure. Only 17% and 14% responded they were turned down on a prior application. Concerns over qualifying was the response of 33% and 18%, the survey found.

Not surprisingly, more borrowers considered themselves very familiar with the mortgage interest rate environment during the boom year of 2020 than in most previous years.

Over two-thirds, 69%, of all borrowers said they were familiar with where rates were at the time they began the mortgage process in 2020, up from 59% in 2019. For refinance borrowers, it was 77%, up from 66% the prior year and topping the previous high of 74% in 2013.

More than half or 55% of those seeking a purchase loan claimed to be very familiar with rates in 2020. This was up from 46% in 2019. The only year that this was higher was also in 2013, at 59%.

"This year's survey clearly shows both the impact of the pandemic and low interest rates on the mortgage market in 2020," said Mark McArdle, the CFPB assistant director for mortgage markets, in a press release. "As with past years, this data can help us better understand underlying trends, identify potential issues as well as possible opportunities for industry to better serve consumers."

In 2020, just 40% of purchase applicants considered themselves very aware of the type of mortgages available; that is the lowest share since this data started being gathered in 2013. The highest share was 45% in 2018. Another 14% admitted they were not aware at all regarding the products in the market.

On the other hand, 58% of refinance borrowers said they were very aware of their choices, the highest share ever.

When asked about how they shopped for a mortgage, 28% of purchase borrowers in 2020 said they picked the loan type first and then found their mortgage lender or broker. That was consistent with past results.

At the same time, one-third of refinance borrowers that year picked their loan type first, up from 31% in 2019 and 30% in 2018.

"The data released today provides a clear view of borrower sentiment about the mortgage process during the COVID pandemic in 2020," said Saty Patrabansh, the FHFA associate director for the Office of Data and Statistics. "This data should be helpful to analysts and policymakers in understanding the complete experience of mortgage borrowers and identifying what challenges may still exist in mortgage lending."