J.D. Power and Associates has released its 2007 Primary Mortgage Servicer Study, based on responses from 11,481 home owners regarding their experiences with their primary mortgage servicer. The study was fielded in three waves in November 2006, February 2007 and May 2007.

J.D. Power and Associates Reports:
Although Borrowers Say Their Primary Mortgage Lenders Are More Flexible About Late Payments, Mortgage Customers Still Believe Lenders are Generally Less Accommodating than They Could Be

BB&T Ranks Highest in Customer Satisfaction with Primary Mortgage Services

Amid the turmoil in the housing and mortgage markets, mortgage customers who report making at least one late payment in the past 12 months indicate that lenders are showing some flexibility in scheduling late payments, but tend to be less understanding and accommodating of their circumstances when compared to 2006, according to the J.D. Power and Associates 2007 Primary Mortgage Servicer StudySM released today.

The study measures customer satisfaction with the process of servicing a loan based on four primary areas: the administration of the customer’s account; the billing process; the payment process; and the process of contacting the mortgage servicer.

The study finds that while borrowers who have made late payments indicate their lenders are slightly more flexible in scheduling payments, customer ratings for the ability of lenders to understand their specific circumstances and their willingness to work with them declined from the 2006 study.

“Despite lenders being flexible with late payment situations, customers still feel as if their mortgage servicer is being less considerate of their specific circumstances,” said Tim Ryan, senior research director of the finance and insurance practice at J.D. Power and Associates. “It is mutually beneficial for both borrower and lender to work through these difficult time periods, and lenders can support the majority of these customers by being even more considerate of their situation. These circumstances often lead to the development of valuable, regular-paying customers.”

BB&T (Branch Banking and Trust) ranks highest in overall customer satisfaction with a score of 860 on a 1,000-point scale. M & T Mortgage follows in the rankings with 828 and Citizens Bank ranks third overall with a score of 825. These lenders all perform particularly well in keeping billing statement error rates lower than the industry average; providing a wide range of options for making payments; providing flexibility when scheduling electronic payments; designing and/or using automated phone systems that address customer needs; and handling customer contacts quickly and efficiently.

USAA, a financial services provider open only to the U.S. military community and their families and therefore not included in the rankings, also achieves a high level of customer satisfaction.

The study finds that there are considerable financial benefits for lenders in delivering a highly satisfying customer experience, including increased referrals and higher customer retention rates—which is the percentage of customers who pay off a loan and then refinance or take out a new mortgage with their current lender. Specifically, doubling the rate of customer retention from the industry average can result in an increase of nearly 3 percent in mortgage servicing valuations, or approximately $38 million for lenders with a $100 billion portfolio.

“In addition to the benefit of increasing servicing right valuations, moving customers to high commitment levels can triple the number of recommendations, almost double the number of additional products that the customer utilizes and reduce marketing costs for generating new business,” said Ryan. “To achieve higher retention rates, lenders can first and foremost enhance the billing and payment process to make it more convenient, and dramatically reduce errors through systems such as e-mail notifications and automatic payments.”

The study also finds that customers who say they “definitely will refinance” with their current lender are much more likely to make monthly payments via the Automated Clearing House (ACH) method, which allows the lender to take payments directly from the customer’s bank account. ACH can eliminate issues with lost, late and misapplied payments, which all negatively impact satisfaction. In addition, the elimination of high-impact errors—particularly, the mismanagement of tax and insurance escrow accounts and payments—and the prompt and precise resolution of problems can directly and positively impact satisfaction.